Small businesses in Florida rely on contracts when dealing with customers and suppliers. Business leaders may also rely on contracts with their employees. And, in some situations, business leaders rely on contracts when dealing with the other owners of the business.
This issue comes up often in the context of partnership agreements, which can be crucial contracts for small businesses.
Defining “partnership”
Simply put, a business partnership exists any time two or more people join together to operate a business for profit. However, beyond this simple definition, the terms of a partnership can vary quite a lot.
Unless they have an agreement stating otherwise, the partners share the business’ profits and liabilities equally, and have equal decision-making power. Sooner or later, this type of arrangement can become a problem.
As time goes by, the individual partners’ needs will change. Eventually, one partner will feel that the situation is unfair.
Of course, the more complex the business and the more partners involved, the more possibility that the partners will disagree. And when partners disagree about the fundamental aspects of the business, their disputes can be very costly for the whole enterprise.
Making things clear
The best way to minimize the possibility of these partnership disputes is to clear up issues in advance by executing a partnership agreement.
A partnership agreement is a contract between the partners that spells out their duties and responsibilities, as well as how they will enjoy the profits of the business.
Some key points to include in a partnership agreement are:
- How to divide profits and losses among the partners
- How to divide the percentage of ownership in the business
- Who has decision-making authority for certain issues
- How to resolve disputes among the partners
- How to handle matters if one partner dies or leaves the business
- How long the partnership should last
- How to dissolve the partnership and/or business if doing so becomes necessary
Deciding these issues in a partnership isn’t easy, but it’s a lot easier than deciding them after the fact in litigation.
Attorneys help business owners understand their options with partnership agreements that can protect them and their companies for years to come.
