Partnership Agreement Form
What is a partnership agreement template?
Are you going into business with a friend or colleague to form a partnership? Perhaps you are unsure of what you may need to protect yourself in the event of unforeseen circumstances. Once thing is for sure, no matter how well you know your business partner you need to protect your financial future. Of course you trust each other, that is not the only issue. Life happens, as they say, while we are busy making other plans. Sometimes those plans don’t work out though and that’s why a partnership agreement is created.
In order to protect yourself and your business, you really need to secure a partnership agreement. What is a partnership agreement? It is a legally binding document that spells out the terms of your business relationship, so that no matter what circumstances arise you will be prepared to handle the issues. Are you prepared is one of you gets ill, and can’t perform his functions in the business for months at a time? What happens when one partner disagrees about what capital investments need to be made, or how expenses are being handled? There are hundreds, and even thousands of scenarios like this that can occur in the course of running a business, and if you don’t have a partnership agreement they may wind up in civil court instead.
A partnership agreement also spells out the specific responsibilities of each partner, whether it is only a partnership of two or even more. One partner may have more responsibilities than another and thus may command a larger salary or portion of the profits when they are calculated. It is also common that each partner will contribute a certain amount of capital to the business, and may command a larger portion of the profits depending on other aspects of shared responsibility.
Another thing to consider is the Uniform Partnership Act, which is a set of laws governing partnerships that was proposed by the National Conference of Commissioners on Uniform State Laws. Each state has their on version of these laws, which were originally enacted in 1914 in every state except Louisiana. Many revisions have been made since then, and are referred to as the RUPA or Revised Uniform Partnership Act.
So what are the basic tenets of a business partnership agreement? Here are a few to consider, based on the template that can be found by visiting this link:
Microsoft Office Partnership Agreement Template
- Formation and Naming of the Business The business must not only have a name, but also have an intended business purpose. Agreement must be made on the name and nature of the business, and stated intention of how business will be conducted.
2. Commencement Date and Duration A date will be decided on when the business has officially started, and how long it continue subject of course to any provisions for retirement, expulsion, or dissolution of the business providing that any alternate partners may be added at a later date.
3. Place of Business The known address of the business, unless there are multiple offices, in which case a headquarters that is recognized by all partners as such.
4. Capital Initial capital investment in the firm, how much specifically from each partner. This is critical since each partner will have a certain predetermined stake in the company and this may decide his or her role as well and future cut of the profits.
5. Profits, Losses and Salaries Subject to certain provisions, each partner shall receive either a salary that is predetermined or a share of the profits to be determined by a unanimous decision of the partnership. Profits and losses are both shared as a percentage of the partners’ relative duties and investment of capital in the company, which will be decided in advance. These amounts should be calculated on a yearly basis, as this is the time period normally designated for gross profits and loss statements.
6. Auditors, Accounts and Records Proper accounting methods should be followed to track complete financial dealings of the company accurately. Profits and losses shall be kept and a balance sheet prepared as necessary to complete a yearly audit process.
7. Bank Accounts A bank should be decided upon in advance to hold the firms monies and pay bills and also to draw salaries from if included in the plans. If each partner is needed to sign checks for any payments, this should be recorded with the bank and signatures should be on file.
8. Insurance Each partner should keep in effect his own insurance policy to provide a plan to cover for his expenses and duties in the event he becomes incapacitated.
9. Obligations of Partners This is a critical portion of the partnership agreement, deciding what obligations each partner has as well as their specific duties in the firm.
Not only who is responsible for the duties that are necessary to run the business, but also a certain code of conduct that is required for this partnership to work.
a. Use their best endeavors toward the operating of the business at all times and conduct themselves in a fair and proper manner in all transactions regarding the firm.
b. Disclose to the other partners any matters that may prejudice or jeopardize the business functions at any time.
c. No partner shall disclose confidential information about any company business or proprietary operating procedures.
10. Management Decisions It should be decided who should be responsible for making certain decisions, such as the hiring and firing of employees if any, training of said staff if necessary, supervision of the inventory and supplies of the company, arranging of office meetings, compilation and control of records of decisions that are made at meetings, and other typical company business on a daily basis.
There are many decisions to be made, and a partnership agreement should answer any and all of these questions that arise concerning these decisions and who is responsible for making them. For any partnership to work, it is essential that a process is in place to explain these things in advance rather than after the fact. Disagreements may take place in any company, but with a well thought out partnership agreement you don’t have to add to the confusion down the road. Foresight can fix many of these problems in advance.
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