What is a Partnership Agreement Lawyer?
When two people join to run a business together, a business partnership is formed. While this can be a great opportunity to combine the expertise of two entrepreneurs for the ultimate business, each member must understand their roles and responsibilities in the partnership.
A partnership agreement lawyer assists members of a partnership to decide on a business structure through drafting a legal document. Partnership agreement lawyers essentially help businesses craft partnership agreements that reflect the relationship
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What Does a Partnership Agreement Lawyer Do?
Partnership agreement lawyers are responsible for guiding business partners through creating or modifying partnership agreements. These lawyers also represent parties to contracts when contract disputes happen.
Partnership agreement lawyers offer expertise in these main areas:
General Partnership
General partnerships are the most common type of partnership. They are formed when two people set out to do business together. Did you know that general partnerships are formed even without any formal paperwork being filed?
Any time two people solicit goods or services for money and share the profits, they are considered members of a general partnership. The thing that makes general partnerships unique from other types of partnerships is liability.
Partners in a general partnership are separately and jointly responsible for debts incurred by the joint business.
Limited Partnership
In a limited partnership, there are two types of partners legally: limited and general partners. There can be multiple limited partners, but there can only be one general partner. General partners are responsible for making management decisions regarding the business.
Limited partners are recognized as part of the business, but they have limited control over daily operations. In a limited partnership, general partners are individually and jointly responsible for all debts and liabilities of the business.
Limited partners, on the other hand, are only responsible for the debts and liabilities of their investment contributions.
Limited Liability Partnership
A limited liability partnership, or LLP, allows individual partners to be free from liability of other partners’ debts and debts and liabilities of the partnership.
When it comes to financial rights, members of a limited liability partnership have the same rights as those in a general partnership. Unlike general partnerships, though, members of an LLP have limited legal liability concerning the partnership.
Limited Liability Limited Partnership
A Limited Liability Limited Partnership (LLLP) is one of the rarest forms of partnership out there. These types of partnerships feature limited personal liability for partners and complete protection against liability when the partnership is sued.
Since LLLPs are so new, many states do not have statutes set up to be able to accommodate the type of partnership. If you’re unsure of whether you’re able to form an LLLP, a partnership agreement lawyer can help you make that determination.
Check out this article to learn more about what partnership agreement lawyers do and how they can help you.
How Much Does a Partnership Contract Cost?
Drafting a partnership agreement involves more work than you might think. In addition to creating a document that includes each partner’s rights and responsibilities, partnership agreement lawyers must make sure each clause in the contract will stand up in the event of small business law litigation.
In general, you can expect to pay anywhere from $500 to $2,000, depending on the complexity of the agreement and how long it takes the lawyer to draft it. Keep in mind that revisions and additions to the contract may come at a premium fee.
When your partnership agreement is completed, it will serve as a roadmap for your business operations. The finished product will determine these major parts of a contract:
- How ownership will be split among partners.
- How decisions will be made.
- How the business will be valued if a partner withdraws from the partnership.
- How the withdrawing partner will be paid if they decide the leave the partnership.
Learn more about partnership agreement costs.
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Key Terms in a Partnership Agreement
Partnership agreements lay the essential legal groundwork that helps your business be more successful. Familiarizing yourself with the key terms of a partnership agreement is a great way to stay in the know about the legal dealings of your company.
Here is the complete list of key terms in a partnership agreement that you should know:
Percentage of Ownership
Partnership agreements govern the working relationship between multiple business owners doing business together under one company. One of the most important parts of these agreements determines what percentage of the company each member of the partnership owns.
The percentage of ownership that each member receives is usually determined by how much of an investment each person made into the startup of the business.
Profit and Loss Division
Businesses are all about making money. If you’re doing business in a partnership, your company has profits and losses each month that must be accounted for. Since profits are used to pay salaries and wages, partnership agreements must denote how these profits and losses are divided among the members of the agreement.
Some agreements opt to equally distribute profits and losses while others opt to divide them up according to how much stake each member has in the company.
Partnership Length
Much of the time, partnerships are formed for an undetermined amount of time, either until the company goes bankrupt or the partners decide they no longer want to do business together. However, in some cases, the partnership may only need to be existent for a certain amount of time.
Partnership agreements document the point at which a partnership will dissolve. This is usually done after a certain pre-determined milestone or timeframe has passed.
Dispute Resolution & Decision Making
Any time more than one person is involved in running a business, disputes are bound to happen. Additionally, decision-making is an essential part of daily operations. Partnership agreements determine pathways to dispute resolution, typically including a dispute resolution clause, and designate who is responsible for decision-making regarding the business.
Binding Power
Sometimes, businesses are bound to a debt or legal agreement that puts them at risk. Since this can be a sticky situation for businesses, partnership agreements must determine who has the power to enter into binding contracts on behalf of the company and what the process should be to complete the objective.
Death or Withdrawal Terms
When a partner dies or otherwise leaves a partnership, the partnership agreement determines what happens to their ownership stake in the business, how they are paid, and whether a process must be followed to replace their presence within the company.
Find out more about the key terms in partnership agreements and why they are important by checking out this article.
Do I Need a Lawyer for a Partnership Agreement?
If you’re ready to create a partnership agreement and start doing business with other entrepreneurs, partnership agreement lawyers can help. Attempting to draft vital contractual documents like partnership agreements is not recommended and could spell trouble for you later.
Post a project on ContractsCounsel today to get connected with partnership agreement lawyers who can help you navigate the legal parts of your business.
