A Partnership Agreement or Contract as the name implies is an agreement between partners in a partnership that features and specifies the terms of a relationship between two or more partners. The elements of a partnership contract include information about the percentage of ownership of all partners, the ratio of profit and loss, the description of management power, responsibilities of each partner, length or duration of a partnership, termination of partnership and reasons of termination and information about the purchase and selling of shares between partners. It is important to draft a partnership contract through an attorney because attorneys are experienced and educated enough to include all the important things in it. You can find some free contract templates online that can be used to create your own contract quickly but they can’t replace a legal advisor. Along with important information regarding the terms of a partnership, a partnership contract usually features details that save you from problems legally at the end of the partnership. Here is a comprehensive Partnership Contract Template that can easily help us to draft our very own partnership contracts.
The Importance of Partnership Contract with a Business
Usually in partnership people never sign partnership contracts because it is also considered a valid partnership however, signing a partnership contract means that partners have secure their relationship legally. The contract will help you to structure and organize your business in a way that best suit the nature and type of your business. Partnership contracts help you to determine the ratio of loss and profit that each partner will take in the light of their contribution in business, the responsibilities of each partner, the effects that will happen when any partner leave the business and other important business related details. As the contract is signed by the entire partner therefore no one can cross their pre-set limit and in case of violation any partner can knock at the door of law.
Things to include in a Partnership Contract
A partnership contract is basically dependent on the regional laws and therefore partners should have complete information regarding partnership law of their region, however, a valid partnership contract contains the following common and major points.
- A registered partnership name is required for any partnership. It can be the first and last words of your name or can be a name that suits your business.
- Each partner has a different proportion of contribution to the business and therefore a valid partnership contract must include the names of each partner along with their contributions. It is important because the determination of loss and profit is dependent on the contributions of the partners.
- The percentage of profit and losses should be written clearly. Also include the duration of withdrawal and also the methods or procedures of distributing all profits at the end of the year.
- A partnership contract usually includes the limits of the authority of each partner. For example, usually in partnership contracts it is stated that each partner is bound to take a certain action on the consent of other partners.
Additional to the above stated points in some partnerships, partners usually adding some other points like ways of resolving disputes, the addition of other partners, actions that will come into action on the death of any partner and other rules and regulations. The purpose of partnership contract is actually to clarify different things between partners in a legal manner. Here is download link,