Building a business is not that easy. You have to think, organize, and plan everything especially if you have partners who will put it up with you and share in the capital. That is why a partnership agreement is imperative in a business, because saying "yes" and shaking hands would not be enough.
Partnership agreement will serve a major role between you and your partners. Since there is no certain federal law that governs partnership, the agreement that all of you will establish will help to avoid arguments, clashes or disagreements.
Your partnership agreement will spell out your rights and responsibilities and it will help to easily settle conflicts and minor misunderstandings that may lead to major dispute.
Partnership Agreement Form
The partnership agreement form must contain the following:
- Name and business. This will contain the name of your business, the products and services and the office or location of your business.
- Terms. This states the duration of your business: the time when you will start the business and until when it will last. The business will start and end with accordance to the agreement unless there are reasons and basis for dissolution or earlier termination.
- Capital contributions. In this section, the amount that partners will contribute as capital will be stated including the date of payment. The capital accounts of the partners must be maintained all the time, in the amount in which the partners share the profits and losses.
- Sharing of Profit and Loss. The sharing and equal division of profit is stated in this portion. Also, in case of loss, the partners must also share responsibilities.
- Withdrawals and salaries. This section will state that neither of the partners will get salary for the service they rendered in the business. Also, they are given the right to withdraw in each other's account, the credit balance from time to time.
- Interest. No interest must be paid on the preliminary payments or contributions to the capital of the partnership or to any succeeding contributions of capital.
- Duties, limits and restrictions in the management. The partners must have equal rights in managing the business. They should also devote their time, to the management of business. A partner should acknowledge his other partner by not using his name or decide, plan or do things without his/ her consent.
- Banking. The finances or funds of the partnership must be deposited in the business' name. Withdrawals must be made upon checks and the partners must sign it.
- Books. Partners must have an access to the book, and it must be kept at the principal office.
- Voluntary Termination. If the partners decided and agreed to end the business, they have the full right to do so. The partnership name and other assets of the business must be sold.
- Death. When one partner dies, the surviving partner has two options on what to do with the business: to purchase the interest of the decedent or to close or terminate the business.
If the surviving partner chose to procure the decedent's interest, he/ she must write a notice of such election to the administrator or executor or to any of the decedent's heirs.