Why You Should Hire an Attorney When Forming a Business Partnership
In the majority of circumstances, it is a mistake to neglect hiring a South Florida business agreement lawyer when you decide to form any type of business partnership. In spite of the trust that you may have between your business partners, conflicts and problems are sometimes an inevitable consequence of doing business. Even if a dispute never occurs, there are important terms to a partnership that need to be outlined in your operating and partnership agreement. If you don’t have the proper operating agreement and partnership agreement in place, disputes can become costly and difficult to resolve.
Areas of concern when forming a business partnership
There are several areas of concern that you will want to you have your attorney address when creating the business partnership including the decision making process and ownership interest of the company. The partnership agreement and/or operating agreement need to outline how the responsibilities of the company are shared between the partners, how much ownership will be given to each partner, and how decisions in the company will be made. In many partnerships there is not an equal division of responsibility and equity, and this needs to be clarified in the agreement.
What happens if a partner withdraws?
Another significant issue that you need to clarify with the partnership agreement is the process that will take place if one partner withdraws from the partnership. This may include a buyout of the partner’s equity share, and the process for doing so would need to be outlined in the agreement. Sometimes equity buyouts can take place over a period of several years rather than all at once, so that the business’s liquid assets are not drained too quickly. Also, the method for evaluating the purchase price for the buyout would need to be clarified in the agreement.
How will the partnership be governed?
Another important area to clarify with the partnership agreement is how the partnership will be governed. Without the appropriate rules laid out in the partnership, default state laws may be used to govern the partnership, and this is often not ideal. In some states for instance, profits must be divided based on the proportionate share of ownership of the company when there is no profit sharing formula outlined in the partnership agreement. This may not be how you want to structure your partnership. If you are in the process of drafting a partnership agreement for a business partnership, contact Mark Schecter at Schecter Law today to have your questions answered and ensure that your agreement is exactly the way you want it to be.