When two or more people form a business partnership together, there are many issues that need to be sorted out upfront. Creating a partnership agreement allows the partners to state their rights and responsibilities clearly. The agreement should address who will make strategic business decisions, how they will divide profits and losses, what will happen if one partner wants to leave, and more.
Taking the time to create a partnership agreement may seem like an unnecessary step. However, creating a partnership agreement before you begin operating your business is smart. Taking time to determine each partner’s rights and responsibilities may help you avoid disputes in the future and help you run your day-to-day operations more smoothly. The Pittsburgh business attorneys at Jones Gregg Creehan Gerace are prepared to answer any questions and help you draft a comprehensive, legally valid partnership agreement.
The Benefits of a Written Partnership Agreement
A partnership agreement is a written legal document that outlines all the terms and conditions of a business partnership between two or more partners. While a non-written partnership agreement may be enforceable in some cases, creating a written partnership agreement is always preferable. A written partnership agreement is a way to protect your business and ensure you and your partners agree on how to manage your business.
Creating a partnership agreement enables partners to communicate about and agree upon crucial points, including how they’ll be paid and how much responsibility each partner will have in the day-to-day operations. Starting your business with clear expectations and boundaries can help your business tremendously.
What Provisions Should Be Included in a Partnership Agreement?
A comprehensive partnership agreement should address as many details as possible related to running a business. It’s important that partners don’t use boilerplate partnership agreements because every business will face unique challenges that should be addressed. An attorney will ask questions about your business and determine which provisions should be included in your partnership agreement. Generally, an agreement should clearly address the following issues:
- The name of the business
- The agreement’s effective date
- The purpose of the business
- How should expenses be divided
- How profits should be divided and paid to partners
- The rights and responsibilities of the partners
- How partners will exit the business
- Each partner’s authority to make and enforce business decisions
- Each partner’s employee management duties
- How new partners should be admitted
- How the business will maintain accounting
- How finances should be audited
The agreement should also include provisions on how the partnership should end, such as by a majority vote for a single vote. It’s also important for the agreement to clearly state how the partners should resolve disputes. Some agreements include a provision mandating the partners to pursue mediation with a third-party mediator or arbitration. Other agreements may state that a partner has a right to pursue a legal claim in court.
The Benefits of Hiring a Partnership Agreement Attorney
The business attorneys at Jones Gregg Creehan Gerace have extensive experience drafting and reviewing partnership agreements. Whether you need to draft a new partnership agreement, make changes to an existing agreement, or enforce the terms of an existing agreement, our skilled attorneys can help. We have extensive experience drafting and reviewing partnership agreements and will ensure everything is accurate and legal.
If you are involved in a dispute with your partners, our attorneys are prepared to read through the agreement, help you understand your rights, and enforce your rights under the agreement. Our attorneys are trial-ready and have extensive courtroom experience. Should your partnership dispute proceed to court, we’re prepared to advocate effectively for you at trial. Our experienced negotiators will always work toward pursuing cost-effective, favorable legal outcomes for our business clients.
Reviewing and Updating Partnership Agreements
It’s normal to have some disagreements during a business partnership. Even if you took time to carefully address areas of potential disagreement at the beginning of your business, new issues may come up. When disagreements or conflicts begin to interfere with the daily operations of your business, you may need to consider modifying your partnership agreement. Suppose your current agreement specifies management practices your company hasn’t been adhering to for the last few years. In that case, updating the agreement to reflect your current goals and practices can be beneficial.
Regularly reviewing your partnership agreement for needed updates can help protect yourself and your business. We recommend reviewing your partnership agreement on an annual basis to ensure the terms in the contract reflect your current practices. When you work with Jones Gregg Creehan Gerace, we can review your current agreement to ensure it complies with current Pennsylvania and federal laws, regulations, and general good business practices. In addition to conducting an annual review, the retirement or death of a partner and the appointment of a new partner should trigger a review of your partnership agreement.
Dissolving a Partnership Agreement
Many business partnerships come to an end eventually. Business partners may decide to end their professional relationship, or one business partner may retire or pass away. In some cases, one partner decides to leave the partnership voluntarily. The business venture may not be viable, or the partners may not be on the same page concerning their company’s vision, working styles, or career goals. Dissolving a partnership on good terms can be in the best interest of everyone involved.
When a formal partnership agreement clearly states the existing strategy, dissolving the partnership can be straightforward. When there is no partnership agreement, the partners will need to negotiate the terms of the dissolution. Whether you have a written agreement or not, working with an attorney will help you navigate the process of dissolving your partnership in a way that protects your rights and interests.
Contact an Experienced Partnership Agreement Attorney in Pittsburgh
If you’re considering starting a business partnership in Pittsburgh or need assistance updating or dissolving your existing partnership agreement, don’t hesitate to contact Jones Gregg Creehan Gerace. Our skilled business attorneys have extensive experience drafting, negotiating, and enforcing partnership agreements. We represent clients in Pittsburgh and the surrounding area.