A business no matter what stands on several factors and business partnership agreement. A good agreement is a necessity for so many obvious and not so obvious reasons.
You need to be conscious, have sufficient knowledge, and keep your eyes open when entering into a business partnership agreement because when you are signing, you are interlacing your finances. This means if your company is sued because of a mistake done by your partner, you are answerable too and the consequences are way harsher than you might expect even your personal assets may come in between for the sake of settlement.
The agreement holds great importance and to overcome the aforementioned issues, there are some types of agreements that can potentially lessen the risks. There are however four types of partnerships and some of which are limited to specific businesses.
At Kleyman Law Group New York, our approach is not just to handle issues, we address the issues and aware people around with legit information. So, before you jump in to sign an agreement, we have some information to help you understand what type of Business partnership agreement will be the best for you.
What is a Business Partnership?
Before anything make yourself clear about what actually a business partnership agreement is. A partnership in general means sharing a business, which means multiple owners. Such agreements are done with mutual understanding. It is not a legal obligation and has nothing to do with the state. However, if you involve the state in your partnership agreement, these entities will bound you with limited liability protection which ultimately can harm your assets at times.
In simple words, if you and some other person run a business without any sort of paperwork, you are in a partnership and you both can make decisions.
What Are the Types of Business Partnership?
Here are the four different types that we will discuss thoroughly.
1. General Partnership
The most basic type, a general partnership. No state involvement. This is one simple type that requires a simple paper signing to conclude a partnership agreement. This agreement states several things including the splitting of profits and ownership and other different terms as per the business type and scenarios.
The owners or partners have full authority. They have free will, they do not need any approval for things like contracts and loans. All the partners (one or more) have total liability and mutual responsibility.
2. Limited Partnership
As the name suggests, limited partnerships or in short LPs are agreements formed authorized by the state. In this agreement, a business has a general partner that manages affairs of the business and limited partners that do not actively take part in business management but rather invest in to keep the company running.
The limited partner’s role is clear, they only invest and take part in the profit and they are not responsible for any sort of debts and company-related issues. such partners have their share in profit and cannot lose money more than they have invested. In cases, where the silent partner chooses to manage the business by himself, they are no longer considered as limited partners and loses their protections and perks as well.
For instance, if you are running a business with two or more partners where you have taken a loan for business nourishment and due to reasons, the business is unable to pay back, in such cases, your legal assets are used as compensation and to pay back the debt. If you need some entity to help you form or dissolve the general partnership, Kleyman law group New York can help.
3. Limited Liability Partnership
Limited liability partnership or LLP is similar to the general partnership as per the operations are in concerts. In this agreement, every partner is active and manages the business affairs.
The difference is that it sets some limits and no one is liable for one another’s actions. The contracts, debts, and collective agreements in the business are the responsibility of everyone but individual errors are bounded and the person commits any omission, he/she will be solely responsible for it. Such agreements are complicated and require a professional Law group involvement. For the best handling of such agreements, Kleyman law group New York can help.
4. Limited Liability Limited Partnership
This one is a new type formed and available in some of the states. A limited liability partnership works similarly to a limited partnership where there is only one general partner. The dissimilarity is that it alters and limits the general partner’s liability which offers liability protection for every partner.
If you are running a small business, there are no issues with LLLP, but if your business will or is working with multiple states, this isn’t a good choice as this is not recognized in all the states. Also, the court doesn’t test the liability protections. Get in touch today with Kleyman Law Group and get the relevant details.
Business Partnership Agreement
A business agreement as already discussed above is an entity established with mutual understanding between partners. So, now the question that may arise in your mind is that what is included in a business partnership agreement?
What’s Included in Business Partnership Agreement?
Business partnerships agreements should include almost every aspect of a business from start to finish. Here are some issues that you should consider including in your business partnership checklist:
Ownership stake - A business partnership agreement must include the percentage each partner owns of the business.
Business operations - All the activities that a business will engage in must be included in the agreement and also the activities it will not engage in.
Decision-making - A business partnership agreement must include how the decisions in the business will be made, the process, and the responsibility of each partner.
Liability - If LLC is chosen as a business partnership, the contract should include liability that every individual partner faces. This can be effectively done by pairing the agreement with other documents like articles of incorporation. Also, an easy way is to get in touch with a partnership agreement law firm and they will help you include every possible detail that should be present in a partnership agreement.
Dispute resolution - Disputes can occur even if you are partnering with any of your relatives, friend, or any loved one and thus the agreement should include a dispute resolution process.
Business dissolution - At some points, if one partner wants to dissolve the business, the agreement should include how dissolution should happen and other alternative options.
If you are going to start a new business, you must include all of the above areas to ensure the swift running of the business. Also, it is a good idea to hire an attorney when forming an agreement. You can search for “Small Business Attorney Near Me” and you will find plenty of options.
General Partnership Agreement
A general partnership agreement is one simple type of agreement where all the partners have full liability and mutual responsibility. Here no state is involved thus, the business can make decisions according to their understandings. This includes all the things including ownership, profit sharing, and more.
What to Know Before Entering a Business Partnership
You need to take everything easy, slow, and clear. A business partnership agreement needs to be initiated with several things kept in mind. Here are things you should consider:
Agreements and Disagreements
If you are two new business partners, shared long and short-term values hold great importance. You both need to be on the same page to get the business running for a long time. However, disagreements are there but those should not be too many as it can hurt your business in the long run.
Questions to Ask when Going Into a Business Partnership
Here is the list of seven questions you should ask your potential partner:
Do You Share the Same Vision for the Company?
What Are Your Strengths and Weaknesses?
How Much Money Will You Each Contribute to the Business?
How Much Time Can You Dedicate to the Business?
How Will You Handle Conflict or Trying Circumstances?
Will You Agree to Put it in Writing?
What’s Your Exit Strategy?
These questions should be asked before going into an agreement. This way you will get a clear idea about the other person and see how he or she sees things when it comes to business partnerships.
How to Decide Partnership Percentage/ Partnership Profit Sharing Ratio
In a business partnership agreements, you can split the profits any way you want, under one condition—all business partners must be in agreement about profit-sharing. You can choose to split the profits equally, or each partner can receive a different base salary and then the partners will split any remaining profits.
Even if you have a strong bond with your partner in business, you should still consult with an attorney for legal advice. Kleyman Law Group can help.
Business Partnership Advantages and Disadvantages
Here are some of the advantages and disadvantages that you will most likely to experience:
Advantages:
More people, more work done in lesser time
You can easily establish your business and start-up costs are low
More capital is available
Borrowing capacity increases
Income is shared, which results in tax savings
Private business affairs, you need to answer no one
There is limited to no external regulation
In cases when you want to change your legal structure, you can do it easily.
Disadvantages:
Unlimited liability of the partners for the debts of the business.
All the partners are liable for the debts business take.
Disagreements and friction among partners and management can occur.
Partners are liable for each other’s actions.
Joining or leaving the partnerships can cost a lot as you have to value all the partnership assets.
Business Partnership Agreement Lawyers can help you if you want to form or dissolve a partnership agreement like Kleyman Law Group, New York.
Remedies for Breach of Partnership Agreement
While you do not need to worry about remedies if you consult with Business Litigation Attorneys but still if you want to know here are some of the remedies and legal actions that you can take:
Expulsion from the Partnership:
If your partner is breaching any term of the contract, showing negligence on obligations, or intends to cause losses, you can expel them from the partnership agreement. This depends on several factors whether the expulsion is possible or not. So, you will need to get in touch with some reputable business partnership lawyer to help you out.
Suing for Breach of Contract:
You can sue your partner if he/she violates the terms and conditions of the established contract. The breach can be anything from showing incompetence to delivering an asset.
Seeking Damages:
This is a follow-up when you sue your partner. After the breach occurs, you can file a claim and under the law get the return for the losses that occurred because of the breach. To do this you will need to show proof and prove that the breach caused losses.
Negotiate a Settlement:
If there is no such harm involved due to the breach, you can negotiate with your partner and avoid a lawsuit.
Business Partnership Agreement Lawyer
So, now you understand what a business partnership agreement is but still if you want to initiate one, the best possible way is to get professional help. Business Partnership Agreement Lawyer is the person you need.
Speak to an Experienced Brooklyn, New York Partnership Agreements Lawyers & Attorneys Today!
The Business Partnership Agreement Lawyers & Attorneys at Kleyman Law Group have all the related knowledge and can help you understand the whole process, establish a contract and even dissolve the agreement if required. Get in touch with an Experienced Brooklyn, New York Partnership Agreements Lawyers & Attorneys Today! If you are looking for a professional New York Law Firm, Kleyman Law Group is the best choice you can make.