The Importance of a Partnership Agreement

The Importance of a Partnership Agreement

The Importance of a Partnership Agreement

A partnership begins when two people or entities join to create a business. This is one of the most common types of businesses. Many large companies that you probably encounter every single day are categorized as partnerships. Google, Microsoft, and McDonald’s all began as partnerships. A strong and successful partnership often depends on the existence of a partnership agreement. A contract customized to suit you and your partner can help prevent disputes that could lead to the downfall of your business. A knowledgeable lawyer can help walk you through this process.

Partnership agreements are not required by law. In fact, just the act of two or more people participating in business operations qualifies as a partnership. There are no filings necessary to make it official. However, it is still important to finalize the partnership with a contract or written agreement. This will ensure that you and your partner have a mutual understanding of the operations of your business. This document will outline how responsibilities, costs, and profits are all divided. Without it, California will deem partners equal, even if one has invested more time or money than the other. A partnership agreement is suited to your particular circumstances and needs as a business and will help avoid misunderstandings or resolve legal issues that may arise.

What to Address in a Partnership Agreement

Once a partnership commences, you should ensure that you cover all the appropriate provisions when drawing up the contract. Some topics that are both common and important are:

  • Contributions of each partner
  • Allocation of profits, losses, and draws
  • How business decisions will be made
  • Each partner’s roles, duties, and authorities
  • How and when new partners can join
  • The exit or death of a partner
  • Resolving disputes

These are all very specific provisions that should be carefully considered. The help of an experienced attorney can make this process much easier and draw up an ironclad agreement to protect both you and your partner.


Share your legal questions with Law Advocate Group, LLP

Skip to content