Bad Business Partnership Agreements

bad business partnership agreements

Partnership Agreements

Business partnership agreements are more than a formality. These agreements are roadmaps that help owners throughout the life of the business. While you can amend a partnership agreement, it’s better to get them right up front. Agreements that don’t anticipate rough spots can do more harm than good.

At the most basic level, a partnership agreement lays out:

• The partners’ responsibilities
• Ownership allocation
• The organization’s debt liabilities

A well-considered partnership agreement will also contain several provisions. It will spell out the procedures for handling disagreements and ending the partnership arrangement. It will also have procedures for what to do if one of the partners passes away. Clarity on these topics will help avoid
partnership disputes.

Bad Withdrawal Plans

Business partnerships don’t always work out. Withdrawal procedures in the agreement will guide the process of ending the partnership. For example, a partnership agreement should establish divestiture and capital withdrawal timelines. A partner who withdraws their share on too little notice can cripple operations. Having an agreed-upon schedule in the partnership agreement will prevent this.

Bad Succession Plans

A thoughtful, well-crafted business partnership agreement should govern succession. The plan should indicate who will take over a partner’s share if they die or want out. If it doesn’t, ownership might go to their beneficiaries. What will these beneficiaries bring to the organization? Will the surviving partner or partners know how to adapt—or want to? Partners can avoid these uncertainties by including a detailed succession plan in their agreement and, what if one or more of the partners want to get out? These issues should be addressed at the drafting stage.

Dispute Resolution Provisions

The partnership agreement should provide a system for resolving partners’ disputes. It will say whether they should litigate or resolve through an alternative dispute resolution process. Considering the options in advance, while the partnership agreement is under construction, is better than waiting.

Tips for Preparing Partnership Agreements

Owners should tailor their partnership agreement to their business’s unique needs. The agreement should include specific language that captures each partner’s intent. A good agreement will allocate duties and ownership benefits. It will also include plans for the dissolution of the partnership, succession, and disputes.

Speak with a Business Law Attorney Today

Your business partnership agreement is important at every stage of your operations. It is important to get it right from the very start. An experienced business law attorney can help create a comprehensive agreement. The agreement will cover the expected and unexpected events arising over the life of a partnership.

Schedule an appointment with Ezer Williamson Law to discuss your business partnership agreement.

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