Business Litigation Law Firm, Markotsis & Lieberman, P.C., Lists the Top 3 Points to Include in Partnership Agreements
HICKSVILLE, N.Y., Jan. 22, 2020 /PRNewswire/ -- Business litigation law firm, Markotsis & Liberman, P.C., lists the top three points to include in a partnership agreement.
When a business is owned and run by two or more people, rather than an entity, a partnership agreement should be entered between them. That way, all responsibilities are clearly established from the beginning so nothing is up for debate should a conflict arise.
The more detailed the partnership agreement the better, but here are three things that are essential to include:
- Ownership percentages: Before the business opens, it's important to establish contributions and how that will play into ownership percentages. For example, one partner may provide more money to the company while another does more of the day to day work, but they may still be equal ownership partners. That's up to you and your partner to decide, but it needs to be established in writing.
- Distribution of profits and losses: Most of the time, partners split profits and losses according to the ownership percentages. Whether or not that's the case, it's still necessary to establish in writing. This section also outlines whether or not partners can take a draw or advance on their profits.
- Ownership contingency plans: A partnership agreement should give a detailed procedure for what happens when ownership changes. This section should include contingency plans for at least the following:
- Bringing in an additional partner
- Selling the business
- One partner buying out the other
- One partner choosing to withdraw from the business
- The death of a partner
- The retirement of a partner
- Bankruptcy of the business
Failing to address any of these areas could lead to legal and financial troubles down the road, especially in the case of a partner's death -- if no agreement is established for that circumstance, the partner's family may end up taking a financial hit.
For other information to include in a partnership agreement, and for assistance in creating one, be sure to reach out to an experienced business litigation law firm.
About Markotsis & Lieberman
Markotsis & Lieberman is a general practice law firm. Practice areas include real estate, litigation (commercial and civil), business formations, agreements and transactions, and wills, trusts and estates. Our team of seasoned attorneys are here to guide you through every step of the legal process providing personalized attention to every client. When you're facing a complicated legal situation, our team of legal experts is there to fight for your rights.
SOURCE Markotsis & Lieberman
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