Protect your business with a thorough partnership agreement
At the beginning of nearly every partnership, the parties involved are on good terms. They are looking forward to the future and believe that their business relationship will last forever. However, just like a marriage, disputes can arise at any time, and being prepared for that could help in the resolution of those disagreements.
If you are starting a partnership, you may want to seriously consider putting together an agreement to govern this relationship that could keep your disputes from ending up in court. The clearer you are, the better the chances are that you and your partner or partners will avoid at least some disputes and have more amicable ways of resolving any issues that do arise.
How can a partnership agreement help your new venture?
While you can put unique terms into your agreement that address your specific situation, most agreements include provisions to cover at least the following:
- What the responsibilities and role of each partner will be, including who will serve as the managing partner
- What each partner’s liability is as it relates to the partnership and to a dispute with one of the partners
- What the tax status will be and to clarify that acceptable tax and accounting practices will govern the distribution of profits to each partner
- What will happen if a partner becomes ill, dies, becomes incompetent, divorces or wishes to leave
- What provisions are needed in order to override the default business laws in New Jersey or the state where the partnership is formed
- What provisions are needed in order to avoid competition from a departing partner or to avoid a conflict of interest
- What steps to take if a dispute arises among them, including any requirements to use mediation or arbitration before considering taking a dispute to court
As you can see, including these provisions in your partnership agreement will help clearly define the issues that tend to cause disputes in the first place. The more detail included in the agreement, the better the chances are that any potential conflicts can be resolved before anyone needs to take the matter outside the partnership.
An experienced attorney can help you create an agreement that may help reduce the potential for disputes. However, even the best written partnership agreement may not be enough to prevent a disagreement from requiring further action. When that happens, an attorney could prove invaluable in explaining your rights and helping you determine the best course of action considering the circumstances.