Partnerships are a key part of the business. They can provide the resources and expertise that businesses need to be successful. However, partnerships also come with their own set of risks. That’s why it’s important to have a business partnership agreement in place before things go wrong. In this blog post, we will discuss what a small business partnership agreement is, how to create one, and the different types of agreements that are available. We’ll also discuss the key components of a good agreement and the benefits of having one in place.
What Is a Small Business Partnership Agreement?
A small business partnership agreement is a contract between two or more individuals who are planning to start a business together. The agreement spells out the roles and responsibilities of each partner, as well as the ownership structure and management hierarchy of the new business. This type of agreement is essential for preventing misunderstandings and disputes down the road. Without a clear small business partnership agreement in place, partners may find themselves at odds over important decisions, such as how to allocate profits or how to handle disagreements. By putting all of the terms of the partnership in writing, partners can avoid these problems and focus on growing their new business.
The Different Types
There are several different types of small business partnership agreements, each designed to address a specific need or situation. The four most common types of business partnership agreements are operating agreements, joint venture agreements, limited liability partnerships (LLPs), and limited partnerships (LPs).
- Operating agreements are the most common type of business partnership agreement. They outline the roles and responsibilities of each partner, as well as how profits and losses will be shared. Operating agreements also spell out what happens if one partner wants to leave the business or if the business is sold.
- Joint venture agreements are similar to operating agreements, but they are used when two businesses come together to work on a specific project or venture. Under a joint venture agreement, each business agrees to share profits, losses, and risks associated with the project. Joint venture agreements also typically include provisions for dissolving the partnership once the project is completed.
- Limited liability partnerships (LLPs) are designed for partnerships in which all partners have some level of control over the business and want to be held liable only for their own actions, not the actions of the other partners. LLPs are common in professional fields such as law and accounting.
- limited partnerships (LPs) are partnerships in which there are at least one general partner and one limited partner. The general partner is responsible for the day-to-day management of the business and has unlimited liability for the debts and liabilities of the partnership. The limited partners have limited liability and are not involved in the day-to-day operation of the business.
The Key Components
There are a few key components that should be included in any small business partnership agreement template, such as:
- The names and contact information of all partners
- A description of the business and its purpose
- Each partner’s share of ownership in the business
- Roles and responsibilities of each partner
- How decisions will be made within the partnership
- What happens if one partner wants to leave or if the business is sold
A small business partnership agreement template can be a helpful tool for small businesses. Having all of the key components in one document can save time and money that would otherwise be spent on drafting a new agreement from scratch. In addition, a template can help ensure that all of the necessary components are included in the agreement.
There are a few benefits to using a small business partnership agreement template:
- Saves time: Creating an agreement from scratch can take up valuable time that could be better spent on running the business. A template allows you to get everything down in one place quickly and easily.
- Saves money: Hiring an attorney to draft an agreement from scratch can be costly. Using a template is a much more affordable option.
- Helps ensure all important components are included: A template can help you make sure that all of the key components are included in your agreement. This can save you from having to make revisions later on.
How to Create a Small Business Partnership Agreement Template?
Creating a small business partnership agreement template is not as difficult as it may seem. You will need to sit down with your partners and decide on the key components that should be included in the agreement. Once you have all of the information gathered, you can start drafting the agreement. Be sure to have a lawyer look over the agreement before you sign it to ensure that everything is in order.
There are many different types of small business partnership agreements, so be sure to choose one that best suits your needs. There are template agreements available online or you can create your own from scratch. Whichever route you decide to take, be sure that all of the key components are included in the agreement.
A small business partnership agreement is a crucial document for any business partnership. It sets forth the rights and responsibilities of each partner, as well as the terms of the partnership. Having a well-drafted agreement in place can help prevent disagreements and legal problems down the road.
Tips for Negotiating a Business Partnership Agreement
When you’re entering into a business partnership, it’s important to have a clear and concise agreement in place. This document will outline the roles and responsibilities of each partner, as well as how profits will be divided. Here are a few tips to keep in mind when negotiating your agreement:
- Be clear about what each partner is responsible for: One of the most important aspects of any partnership is defining what each person’s role will be. Make sure that you are both on the same page about who is responsible for what tasks.
- Decide how profits will be divided: It’s important to decide upfront how profits (and losses) will be divided between partners. This can help avoid any conflict down the road.
- Keep it in writing: A business partnership agreement is a legally binding document. This means that it can be used in court if there is ever a dispute between partners. Make sure to have an attorney review the agreement before signing it.
A small business partnership agreement template can be a helpful tool when starting a new business venture with one or more partners. By outlining the key components of the partnership, such as roles and responsibilities, as well as how profits will be divided, you can help avoid potential conflict down the road. Keep in mind that this agreement should be reviewed by an attorney before signing it.
This small business partnership agreement template can be used as a starting point for your own agreement. Be sure to have an attorney review the agreement before signing it.
SMALL BUSINESS PARTNERSHIP AGREEMENT This Business Partnership Agreement (“Agreement”), dated on this _____ day of _______, 20__ (the “Effective Date”) is entered into by and between the following Partners (collectively referred to as the “Partners”): Name: Name: __________________________________ __________________________________ Located at: Located at: __________________________________ __________________________________ __________________________________ __________________________________ __________________________________ __________________________________ WHEREAS, the above-named Partners wish to associate themselves as Partners in a business enterprise (hereinafter referred to as the “Partnership”) as set forth in this Agreement; and WHEREAS, the Partners acknowledge that they have read and understood all of the terms and conditions herein and agree to be bound by the same; and WHEREAS, this Partnership Agreement shall remain in effect and full force unless otherwise terminated or dissolved in accordance with the terms set forth herein or by operation of law; NOW, THEREFORE, in consideration of the mutual covenants, terms, and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: Name. The Partnership formed under this Agreement shall be known as _____________________________. The business of this Partnership shall be constructed under this name, or other name as mutually agreed upon by the Partners. The Partnership. The Partnership’s principal place of business shall be: __________________________________________ __________________________________________ __________________________________________ The records and books of this Partnership shall be kept at the above location. However, subsidiary or additional places of business may be created at other locations and may be agreed upon by the mutual consent of the Partners. The Partnership is created in accordance with the applicable laws in the State of __________________. This Agreement shall be governed under the laws of the State of ___________________. The primary purpose of this Partnership is: _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ If appliable, the Partners agree to obtain any required licenses and permits necessary to do business, register its Doing Business as Name (“DBA”), and acquire a Federal Employer Identification Number (“EIN”). Initial Contributions. The Partners agree to make an initial contribution to the Partnership as follows: Partner Name: Contribution: __________________________________ __________________________________ __________________________________ __________________________________ The Contribution of each Partner subject to this Agreement shall be made in full on or before __________________________________________. All Contributions shall be considered final and shall not be subject to withdrawal unless expressly agreed upon by all Partners. All Contributions shall be deposited into a joint capital account. Ownership Interest and Authority. The Partners’ ownership interest in this Partnership shall be as follows: Partner Name: Ownership Percentage (%): __________________________________ __________________________________ __________________________________ __________________________________ Any and all property rightfully owned by the Partnership, whether real, personal, tangible or intangible shall be considered to be owned by the Partnership as an entity. Neither Partner shall have direct ownership of any such Partnership property. The Partners’ authority to make decisions on behalf of the Partnership shall be defined as stated below: _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ Costs. The Partners shall share the costs according to the below percentages: Partner Name: Costs (%): __________________________________ __________________________________ __________________________________ __________________________________ Profits and Losses. The Partners agree that the Partnerships finances and applicable assets shall be audited on the following basis: _______________________________________________________________________________. The Partnership’s accounting will be conducted on a __________________________________________ and the Partner in charge of the Partnership’s accounting of all profits and losses will be ___________________________________________. While auditing the Partnership’s finances and relevant assets, the net profit and loss of the Partnership subject to this Agreement shall be divided in the same manner or proportion as the Partner’s respective Capital Contributions and after the costs of the Partnership have been satisfied according to the above listed cost percentages. The Partners may decide to allocate or distribute such profits to the Partnership. If approved, the distributions shall be made on the _________ day of each month. Accounting. All accounts related to the Partnership subject to this Agreement, including contribution and distribution accounts will be audited. Each Partner will sustain a joint contribution account. The Partners agree to keep accurate and complete books for any and all accounts related to the Partnership. Any Partner, majority or minority, will be entitled to review all books at any time upon request. Each Partner understands that he or she will be responsible for his or her own taxes on any distributions made. The Partners shall provide their report on the status of the Partnership within two (2) weeks of the end of the fiscal year. The fiscal year and the taxable year of the Partnership is the calendar year. The below listed Partner(s) have the authority to execute checks from any joint Partner Account: _____________________________________________________________________________________ Voting. Unless otherwise specified in this Agreement, any affairs of the Partnership will be determined by majority vote. Votes are to be cast in the same percentage as Capital Contributions unless otherwise agreed upon by the Partners. Salary. Partners must agree to and provide unanimous consent should a permanent salary is to be established. Moreover, unanimous consent by the Partners is also required for the amount of the salary provided to each Partner. New Partners. The Partnership shall amend this Agreement to include any new Partners upon the express and unanimous vote of all Partners. The name of the Partnership can be amended if a new Partner is added to the Partnership upon the express and unanimous vote of all Partners. Death or Withdrawal. The Partners reserve the right to withdrawal from the Partnership at any given time. Upon the withdrawal of a Partner by choice of by death, the remaining Partners shall have the option to buy out the remaining shares of the Partnership. If the Partners decide to buy out the shares, the shares shall be brought in equal amounts by all Partners under the Partnership. The Partners understand and agree to retain an outside firm to evaluate the value of the remaining shares. Moreover, the Partners must come to a unanimous agreement that the outside firm’s overall valuation of the share to be considered final. The Partners shall have ____ days to determine whether they wish to buy the remaining shares together and equally dispense the same. However, if the Partners do not agree to buy the shares, individual Partners shall have the right to buy the shares individually. If more than one Partner wishes to acquire the remaining shares, the shares shall be equally divided among the requesting Partners. In the event that all Partners, by unanimous vote, the Partnership can choose to allow a non-Partner to buy the shares effectively replacing the previous Partner. In the event that no individual Partner(s) proceed to finalize a purchase agreement within _____ days, the Partnership will be dissolved. The name of the Partnership can be amended upon an express and unanimous vote of all Partners if a Partner is effectively bought out. Dissolution. In the event the Partnership is dissolved by majority vote, the Partnership shall be liquidated, and the debts shall be paid. Any remaining funds after all of the debts have been paid shall be distributed based on the percentage of ownership interest as defined in this Agreement. Dispute Resolution. Parties to this Agreement shall first attempt to settle any dispute through good-faith negotiation. If the dispute cannot be settled between the parties via negotiation, either Party may initiate mediation or binding arbitration in the State of ________________. If the Parties do not wish to mediate or arbitrate the dispute and litigation is necessary, this Agreement will be interpreted based on the laws of the State of _________________, without regard to the conflict of law provisions of such state. The Parties agree the dispute will be resolved in a court of competent jurisdiction in the State of ______________________. Legal Fees. In the event of any suit or action to enforce or interpret any provision of this Agreement (or that is based on this Agreement), the prevailing party is entitled to recover, in addition to other costs, reasonable attorney fees in connection with the suit, action, or arbitration, and in any appeals. The determination of who is the prevailing party and the amount of reasonable attorney fees to be paid to the prevailing party will be decided by the court or courts, including any appellate courts, in which the matter is tried, heard, or decided. Amendments. Amendments to this Agreement may be proposed by any Partner. A proposed amendment will be adopted and become effective as an amendment only on the written approval of all of the Partners. Further Effect. The parties agree to execute other documents reasonably necessary to further effect and evidence the terms of this Agreement, as long as the terms and provisions of the other documents are fully consistent with the terms of this Agreement. Severability. If any term or provision of this Agreement is held to be void or unenforceable, that term or provision will be severed from this Agreement, the balance of the Agreement will survive, and the balance of this Agreement will be reasonably construed to carry out the intent of the parties as evidenced by the terms of this Agreement. Notices. All notices required to be given by this Agreement will be in writing and will be effective when actually delivered or, if mailed, when deposited as certified mail, postage prepaid, directed to the addresses first shown above for each Partner or to such other address as a Partner may specify by notice given in conformance with these provisions to the other Partners. Captions for Convenience. All captions herein are for convenience or reference only and do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile. email, or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement. Electronic Signatures. This Agreement and related documents entered into in connection with this Agreement are signed when a party’s signature is delivered electronically, and these signatures must be treated in all respects as having the same force and effect as original signatures. Entire Agreement; Modification. This Agreement constitutes the entire understanding and agreement between the Partners with respect to the subject matter of this Agreement. No agreements, understandings, restrictions, representations, or warranties exist between or among the members other than those in this Agreement or referred to or provided for in this Agreement. No modification or amendment of any provision of this Agreement will be binding on any Partner unless in writing and signed by all the Partners. IN WITNESS WHEREOF, the undersigned have executed this Business Partnership Agreement effective as of the ____________ day of ________________, 20__ (the “Effective Date”). Dated: _______________________ Dated: _______________________ _________________________________________ ______________________________________ Partner’s Signature Partner’s Signature ________________________________________ _______________________________________ Partner’s Printed Partner’s Printed Name Partner’s Contact Information: Partner’s Contact Information: Address: ______________________________ Address: _____________________________ Phone Number: _________________________ Phone Number: _________________________ Email Address: _________________________ Email Address: _________________________