A partnership agreement stands out as a contract between you and the other partners within your business. The agreement outlines the responsibilities and duties of each partner, which includes the duties for the business and each other. Through this particular agreement, important matters will be governed, which occurs within a business. These matters include resolving all the disputes that take place among the partners and making the right decision for the business. Once the agreement is written, all the partners must sign the document. Signing the document proves that each of them agrees to the information mention within the agreement.
Partnership Agreement: Why provide it in writing?
In Australia, you are not required to have your partnership agreement providing in writing. But it will be much better to engage a Partnership Agreements lawyers to help you draft out a document, which will help in governing your partnership. This stands out to be pretty imperative if you have a particular vision on how all your partners will operate. But providing a partnership agreement in writing will help you and your partners to benefits greatly.
It’s because a written agreement will clarify the nature of the business and also the relationship with the partners. For each territory and state’s relevant legislation in Australia, there are default provisions, which get applied when there is a no-written partnership agreement. Drafting out a written agreement will help in ensuring that the legislation doesn’t control how you operate your business.
In addition to that, having a written agreement right from the start will lessen the issue of your partners not agreeing on the scope of your partnership. Also, when things go downhill, the written agreement will ensure that there is no confusion about terms, which are operated by the partners.
Why take legal advice from the lawyers on partnership agreements?
When you have decided to create a partnership agreement with your partners, you must consider seeking some legal advice on it. To do so, you must get in touch with experienced and professional Commercial litigation lawyers because they will provide some advice on such matters. A partnership agreement is a legal document, and it has the power to clarify all the partnership liabilities.
If you and your partners have never signed an agreement before, getting some help from the Commercial lawyers Perth will be highly beneficial. They will fill you up with some essential details and information about the agreement. The lawyers will also offer you details on how you can manage the risk within your partnership and ensure that you understand the obligation as a partner.
After that, the lawyers will take the responsibility to draft out your partnership agreement. If you are not sure of some things or want to gain a deep understanding of an area, the lawyers will be there to assist you.
Partnership Agreement: Terms you must includes
All partnership agreements are not the same, and you can reflect all these intricacies within your agreement. But to make an excellent agreement, you must include some crucial terms. Check below!
- The financial contribution: The term financial contribution will describe what the partners will contribute financially to the business. The typical scenario is between two partners, where they split the contribution into 50-50, but it’s not always the case. When creating a partnership agreement, you must include it in the provision, as it will prevent disagreements from taking place in the future.
- Rights and Obligations: On many occasions, all the partners will have the same obligations and rights when it comes to partnerships. But sometimes, the partners will be responsible for different aspects of the business. So, when you include a clause for obligation, it will ensure that all the partners are aware of their responsibilities of the partnership.
- Exit: This is a term, which covers what exactly will happen when one of the partners wishes to depart and the method they must follow. When this term is not present, the relevant partnership legislation will apply, and the partnership will dissolve automatically. Including an existing provision within your partnership agreement will override the legislation. Doing so will give you the power to continue the partnership with the remaining partners, even when one decides to leave.
- Decision Making: Decision-making is something that should be included within the partnership agreement. This particular term will help in outlining how you and the other partners will make decisions within the partnership. It will also provide information on the type of decisions the partners have to make. The agreement will also carry details whether the decisions will be made by a group of partners, a single partner decided on behalf of the other partners, or unanimous partners.
- Termination: If the partnerships are all set to end their business, you have the right process to wind up the partnership effectively. This clause will cover what will happen to the responsibility and property of each partner, once the business comes to an end.
- Dispute Resolution: On many occasions, the partners will disagree on several matters related to the business. For such reasons, including a dispute resolution method within the agreement is highly crucial. This will enable the partners to follow a process that will help them resolve all the differences amicably. Along with that, you must also include what to do if this process fails.
- Losses and Profits: This term is pretty similar to the financial contributions, as it will provide details on how to split the profits and losses of the partnership among the partners. You also need to consider whether you to spilt the losses and profits to align the split with the losses and profits of the financial contributions.
When there is a partnership agreement, it will help in running the partnership smoothly with no hassle. An agreement is highly essential when things do not go as planned, and will stop all the unnecessary disputes and problems from taking place within a business. The partnership agreement will provide details about the responsibilities, which each partner must carry. It will also help them make the right decision, which will help the business grow.