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- iHaveNet.com: Small Business Guide
Real Small Business
When you're in a partnership, it's highly advisable to have a formal, written partnership agreement. While it is not required by law, a partnership agreement can give you a framework for defining each partner's obligations, and settling the conflicts, disagreements and other difficult-to-resolve issues that naturally occur in nearly every business relationship. Ultimately, it will help ensure the long-term well-being of your business.
Without a partnership agreement, your business will likely be governed by the Uniform Partnership Act (UPA). Adopted with some variations by nearly every state, the UPA sets the guidelines for partnerships, but allows for little flexibility. This general law does not take into account the unique relationships most partnerships have, and it may not fit your specific business. For example, without a formal agreement, the law may assume that each partner has an equal share of the business, and tax liability would be determined accordingly. Similarly, should one partner leave the business or die, the partnership would have to be dissolved, unless an agreement stipulates otherwise.
Create your written partnership agreement with the assumption that anything that can go wrong with your partnership will. Friction between partners over things such as money, power or ego frequently undo these business relationships. Your partnership agreement should prepare you for all possible "what-if" situations, and set methods for resolving them. You will find that it pays to be extra cautious.
You can save money by drafting your own version of the key parts of your agreement, then taking it to your firm's attorney to be reviewed, clarified, modified and finalized. It is important to have an attorney review the contract, because you want to make sure it complies with the partnership laws of your state. Finally, each partner might want to have his or her own lawyer look it over, since your firm's attorney can't represent the interests of each individual partner.
These are the key areas you will want to cover in your written partnership agreement:
Partnership Agreement Basics
- What is the name of the partnership?
- What is the purpose of the partnership?
- What is the duration of the partnership?
Partnership Agreement Responsibilities, performance and remuneration
- What is each partner's role?
- What are each partner's responsibilities within the company, and what level of performance is expected?
- Are partners expected to make a full-time commitment to the venture, or are business activities permitted?
- What will be the income of each partner, and how will profits or losses be distributed?
Partnership Agreement Contributions
- What will each partner be contributing to the partnership in terms of cash, assets, loans, investments, and/or labor?
- If a partner loans to company money, what will be the terms or repayment?
- Will the partners be expected to make additional contributions to the partnership, and if so, how will that be handled?
Withdrawal of partners / Admission of new partners
- What guidelines should be followed if one partner wants to leave the partnership?
- Will partners be allowed to sell their interests in the business to outsiders?
- On what grounds can a partner be expelled from the partnership (misconduct, non-performance of duties)?
- How will new partners be admitted to the partnership?
Partnership Agreement Buy-out procedures
- What guidelines should be followed if one partner wants to retire or leave the partnership?
- What happens if a partner is incapacitated or dies?
- Will the partnership take out "key man" life insurance to ensure the surviving partner is able to buy the deceased partner's shares from his/her heirs?
- Will partners who leave have to sign a non-compete agreement?
Partnership Agreement Dispute resolution
- What methods will be used to settle disputes that can't be otherwise resolved?
- What procedures should be used in the event of a tie vote between partners on crucial partnership decisions?
- Will you use mediation or binding arbitration?
- If disputes can't be resolved, is there a mechanism in place for dissolving the partnership?
Financial arrangements
- What banking arrangements will be made for the partnership?
- Which partners will have check signing privileges?
- Who will be authorized to draw on the partnership's accounts?
- How will the books be kept?
Method for dissolving the partnership
- When can the partnership be dissolved?
- What happens to the partnership if the partners decide they can't work together?
Partnership Agreement - Valuation
- What methods will be used to determine the value of the business in the event of a sale, dissolution, death, disability or withdrawal of a partner?
Small Business Guide
- Starting Up Your Business
- Coming Up With a Winning Business Idea
- Common Startup Mistakes
- The New Rules for Startups
- Business Incubator FAQs
- Naming Your Business
- Researching Your Business
- Your Personal Savings
- Registration, Licenses, and Permits
- Getting a Tax ID Number
- Fast-Growth Startup Resources
- Structuring Your Business
- Overview: Corporations
- State Offices of Incorporation
- Incorporate Out of State?
- Writing a Partnership Agreement
- Choosing a Board of Directors
- Basics of a C Corporation
- Basics of an S Corporation
- Basics of an LLC
- Basics of a Sole Proprietorship
- Basics of a Non-Profit Corporation
- Basics of a Professional Corporation
- Basics of a General Partnership
- Basics of a Limited Partnership
- Your Company's Public Relations
- Elements of a Successful Public Relations Campaign
- How to Use Your Press Coverage Effectively
- Press Releases
- How to Write a Successful Press Release
- Sample Product/Service Press Release
- Sample Commentary Press Release
- Sample Event Press Release
- Sample Tips Press Release
- Sample Personnel Press Release
- Effective Competitive Analysis
- Managing Purchasing to Maximize Cash Flow
- Top Six Pricing Mistakes Businesses Make
- How to Avoid Lowering Your Prices
- Bidding Basics
- Hiring Staff
- Creating an Effective Job Description
- Do You Know How to Pick Them?
- Little-Known Hiring Resources
- Classifying Contract Workers
- Tips for Successful Interviewing
- What You Can't Ask in a Job Interview
- New Hire Paperwork
- Small Business Insurance
- Types of Insurance for Small Businesses
- Small Business Insurance FAQs
- Insurance Resources for Small Businesses
- Home Office Insurance: Myths & Realities
- Small Business Resources
- Government Resources for Small Business on the Web
- Resources for Women Entrepreneurs
- Fast-Growth Startup Resources
- Small Business Security Resources
- Taking Time Off
- Your Pre-Vacation Checklist
- How to Take a Vacation
- Learning to Delegate
- Getting Away When You Can't Get Away
- Preparing for Tax Season
- Year-End Planning Tax Savers
- 10 Ways to Pay Less in Tax
- 25 Common Business Deductions and Expenses
- Avoid These Common Errors and Audit Triggers
- Understanding the Home Office Deduction
- Corporate Income Taxes Primer
- Employment Taxes Primer
- Sales Tax Primer
- Sole Proprietorships and Partnerships Tax Primer
- How to Get a Filing Extension
- Year-End Reconciliation
- Getting the Most from Your Accountant
- Developing Accurate Financial Projections
- Cash Flow
- 10 Ways to Help Increase Your Cash Flow
- Cash vs Accrual Accounting
- Bookkeeping and Record Keeping Basics
- Quick Ways to Get Through a Cash Crunch
- Projecting Cash Flow
- Cash Flow Triage
- Getting Funding
- Cash Flow Through Factoring
- Small Business Investment Corporations (SBIC)
- Traditional Funding Sources
- Non-Traditional Funding Sources
- Your Company's Credit
- How to Read a Business Credit Report
- Credit Terms Glossary for Your Small Business
- How to Protect and Improve Your Business Credit Rating
- Give Your Business the Financing Edge
- Employee Compensation
- Employee Benefits
- Bonuses: How To Be Fair
- Workers' Compensation Q&A
- Keeping Workers' Compensation Costs Down
- Payroll Management Choices
- Key Elements of Payroll
- Working with a Payroll Service Provider
- How to Create a Business Plan
Starting Your Own Business - Writing a Partnership Agreement
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