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What Terms Should a Business Partnership Agreement Include?

Posted on in Business Partnerships

IL business lawyerBusiness partnerships can be very beneficial, allowing multiple people to contribute capital to a company, share ownership, and work together to manage the business. However, it is very important to make sure all partners fully understand the terms of the partnership, their rights and duties, and how they can resolve any disagreements or other issues that may arise. A well-drafted partnership agreement is one of the most important types of contracts that may affect a business, and partners can work with an experienced business law attorney to make sure their agreement will meet their company’s needs.

Partnership Agreement Terms

At a minimum, a partnership agreement should detail the name and address of the business, information about all of the partners, the purpose of the partnership, and the date the partnership began. An agreement should also address issues such as:

  • Ownership stakes - Each partner’s percentage of ownership in the business should be fully defined. These decisions may be based on the capital that each partner has invested in the business or other contributions that they will be making to the company.
  • Management responsibilities - An agreement may fully define each partner’s role in the company, including the areas of the business they will oversee and their day-to-day duties.
  • Compensation and division of profits and losses - Depending on the partners’ roles, they may receive a salary or other forms of compensation. A partnership agreement should also detail how partners will divide profits earned by the business, when they can draw from business funds, and how they will share in business losses.
  • Decision-making and dispute resolution - Partners will need to decide on both the long-term strategy for a business and how to address regular, day-to-day issues. An agreement may specify whether partners will hold regular meetings and vote on decisions or whether they may be required to reach a consensus. It may also detail the methods that may be used to resolve disputes between partners, such as mediation.
  • Binding power - A partnership agreement should detail whether a partner will have the authority to enter into contracts or take out loans on behalf of the business.
  • Partnership changes - Partners will need to understand the procedures for bringing new partners into the business, including the level of authority that new partners will have and whether they will participate in certain business decisions. A partnership agreement can also address how matters will be handled if a partner leaves the business or other situations where the partnership may be dissolved.

Contact Our DuPage County Partnership Agreement Lawyers

At Stock, Carlson & Asso. LLC, we can help you and your partners create an agreement that will meet your company’s needs. We will help you understand what terms should be included, and we will advise you on how you protect the interests of your business and make sure it will be able to continue operating successfully in the years to come. Contact our Wheaton business law attorneys today at 630-665-2500 to learn how we can help with your legal needs.

Sources:

https://www.nerdwallet.com/article/small-business/partnership-agreement

https://www.forbes.com/sites/amandaneville/2013/06/07/five-clauses-every-partnership-agreement-needs/?sh=67054f375cde

https://www.investopedia.com/ask/answers/041015/which-terms-should-be-included-partnership-agreement.asp

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