What is Business Partnership Agreement Drafting?
A business partnership agreement is a legally-binding document signed by co-owners who wish to carry on the business together. It provides clarity on a number of situations they will face, such as their respective duties and how they can effectively settle disputes that arise.
When drafting this agreement, you need to ensure that it’s clear and legally valid to protect your interests. This also enables smooth business operations and continuity should something significant occur, such as one partner’s withdrawal.
Here’s what to know about key terms in a business partnership agreement, how to draft it, and why you should consult a lawyer for help with the business partnership agreement drafting process.
What Key Terms are in a Business Partnership Agreement?
A business partnership agreement should include the following terms:
- Contributions. This is a detailed list of what contributions partners will make in the business, and it should include ownership percentages.
- Division of profits and losses. Partners will have to decide on how they will split all the profits and losses. This could be distributed depending on the ownership percentage.
- Authority. The agreement should specify partners’ binding authority, as this can potentially put the company at risk if not well defined.
- Withdrawal. This should outline what happens if one partner leaves the business or passes away to ensure a smooth transition.
- Dispute resolution. If business partners disagree, the agreement should include information for how they can resolve it quickly, such as via a dispute-resolution method like mediation or arbitration.
- Confidentiality. The agreement should protect the company’s trade secrets and other confidential information to prevent reputational or other harm.
What are Tips for Drafting a Business Partnership Agreement?
When compiling a business partnership agreement, there are some things to do and avoid. These include the following:
State the Partnership Name
The agreement should include the legal name of your partnership, its purpose, and its intended duration. Although this might sound basic, it’s essential to protect brand identity while providing partners with business clarity.
Mention Detailed Roles and Duties
The business’s operational management and each partner’s duties must be clearly defined. This prevents misaligned expectations and power conflicts.
Provide Authority Clarity
When it comes to decision-making, partners’ level of authority for large and small decisions must be clarified. Not only does this reduce the risk of disputes, but it can prevent deadlock situations that can stall business operations.
Mention How to Add Partners
Since you might want to bring other partners into the business in the future, you should outline how this process will be executed in the agreement. It serves to protect business stability and prevent partners from being at a disadvantage.
Plan Exits
There are various conditions that can trigger a partner exit, such as if a partner retires or voluntary leaves. There should be buyout provisions provided for clarity about how their share will be purchased by the remaining partners.
Consider Dissolution
There should be information in the agreement about how the partnership can be dissolved should this be required. This should include how to distribute any remaining assets.
Include Administration Provisions
The admin side of the business should be included to ensure operational and regulatory compliance. Admin provisions will clearly define responsibilities for tax reporting and the following of all relevant laws. It’s also crucial to specify the governing law and jurisdiction as this will affect various aspects of the agreement, such as where disputes are settled.
Make the Language Clear
Some business contracts can be dense and filled with jargon. Keep the wording across your business partnership agreement clear and simple to understand. Avoid any vagueness that can be open to interpretation, as this can result in disputes.
How Can a Lawyer Help You with Business Partnership Agreement Drafting?
HIring a lawyer to help you draft a business partnership agreement will ensure your contract is legally valid and comprehensive to protect your interests. Here are some tasks they’ll do for you.
- They’ll clarify all roles and duties to reduce uncertainty.
- They’ll check that the contract is legally compliant with all regulations and laws to protect you and the business from legal risks.
- They’ll draft clear, accessible terms that all parties can understand.
- They’ll include dispute-resolution methods, such as mediation, to ensure conflicts that arise can be resolved quickly without involving time-consuming litigation.
- They’ll explain potential risks and liabilities to safeguard your assets.
- They’ll tailor the business partnership agreement so that it’s suitable for your business structure and goals.
- They’ll protect the business’s sensitive information and intellectual property, such as by including confidentiality and non-compete clauses.
- They’ll negotiate terms to be included in the agreement on your behalf so that the document is balanced and fair.
Where Can You Hire a Lawyer to Draft a Business Partnership Agreement
If you need to hire a lawyer to help you draft a business partnership agreement, you don’t have to spend time cold-calling traditional law firms in your location. You can make use of an online legal platform that puts you in contact with the right lawyers.
On ContractsCounsel, one of the largest online legal marketplaces, you’ll have access to a curated network of lawyers from the comfort of your home. All lawyers on the platform have been vetted and possess the expertise to help you with drafting or reviewing your contracts.
To request that a lawyer on ContractsCounsel drafts your business partnership agreement, follow these easy steps.
1. Go to the ContractsCounsel marketplace, where you can post your project for free.
2. Wait for lawyer bids. You’ll receive multiple bids from lawyers directly on the platform who can assist you.
3. Once you receive the lawyer bids, you should review the lawyers' profiles. The platform provides a range of lawyer data to help you choose the best lawyer, such as their location, client ratings, years of experience, and field of expertise.
4. Connect with a lawyer you think is best suited to your requirements and hire them to draft your business partnership agreement so it’s legal and transparent. You can also schedule a legal chat with a lawyer should you have any queries.
