What does a partnership agreement cost? This is a question when looking to form a new partnership and want to formalize it with a partnership agreement. Let’s explore this question and also review some general information about partnership agreements.
How Much Does a Partnership Agreement Cost?
Partnership agreements are legal legally binding documents that outline business practices for the partners of a company. Partnership agreements establish how a company will be managed, ownership, profit and loss distribution, and partner responsibilities.
Getting help from a partnership agreement lawyer to draft a partnership agreement is highly encouraged since these are important documents that outline how a business partnership will run and are key to their success. Partnership agreements are also important to clearly outline terms between partners to avoid future business disputes.
Based on ContractsCounsel’s marketplace data, the average cost of a project involving a partnership agreement is $603.89 .
Partnership agreement cost depends on many variables, which includes the service requested, number of partners, and the number of custom terms needed to be included in the document.
What’s Typically Included in a Partnership Agreement
Below are the key sections that are typically included in a partnership agreement.
- Name. This section includes the name of the business.
- Purpose. This section includes the service or product the business provides to customers.
- Partners’ Info. This section outlines the information about each of the partners involved in the business.
- Capital Contributions. This section establishes how much capital each partner will be contributing to the business.
- Ownership. This section shows the percentage each partner owns of the company.
- Profit and Loss Distribution. This section explains how profits and losses will be handled between the partners.
- Management and Voting. This section shows the roles and responsibilities of each partner, along with how the company handles voting on issues.
- Adding or Removing Partners. This section establishes a protocol for adding or removing partners from the partnership.
- Dissolution. This section establishes how the company will be dissolved if the partners decide to shut it down.
- Tax Election. This section establishes which partner will handle all tax communications.
- Death or Disability. This section establishes what happens if there is a death or a partner becomes disable from participating in the business.
Types of Partnerships
Partnership agreements can vary greatly depending on the type of partnership set up, as well as the terms needing to be included in the document. Below is a list of the types of partnerships to consider, all of which have their own pros and cons.
- General Partnership. This type of partnership has all partners equally sharing liabilities, profits, and assets.
- Limited Partnership . Limited partnerships are good options for when partners do not contribute the same amount of capital. Partners that contribute more capital will benefit more in the upside and downside of the business performance.
- Limited Liability Partnership . This type of partnership gives partners limited personal liability while maintaining equal shares in the company.
Examples of Partnership Agreement Projects
Partnership Agreement Drafting Service
Many business partners will hire a knowledgeable lawyer to help consult and draft a partnership agreement that fits the requirements of their business. This is where the business will incur partnership agreement costs.
Partnership agreement drafting typically involves a consultation with the business partners to learn about the terms they want include in the agreement, then implementing those terms into a partnership agreement template to make sure it includes everything the business needs. Partnership agreement costs can vary based on how many custom terms need to be included in the document.
Reasons you may need to find a lawyer to draft an operating include:
- Forming a New Partnership. You may want to form a new partnership and need to draft a partnership agreement from scratch.
- Partners Want Custom Terms. A set of business partners may need to hire a lawyer if they know they have very custom terms that won’t fit in their current partnership agreement template.
Partnership Agreement Review Service
In some circumstances, partners may have an existing partnership agreement template that was signed when they started the business. Given the fact that businesses evolve, they may require a lawyer to review the current partnership agreement in order to answer questions or implement updates.
Reasons you may need to find a lawyer to review a partnership agreement include:
- Make Sure It Fits Your Business. Partners may have used a template but want to get it double checked by a lawyer to make sure it has everything they need.
- Update the Agreement with New Terms. As a business grows, partners my require new terms or updates to their current partnership agreement.
- Independent Partner Review. The partnership agreement may have been drafted by one of the partner’s lawyers, but an individual partner may want to review it with a separate lawyer to make sure they are protected.
- Partner Has Questions. One of the partners may have a question about their obligations or rights, and may hire a lawyer to independently review the partnership agreement they signed.
- Major Change in Partnership. The business may be expecting a major upcoming change and need to get the partnership agreement reviewed to see if the change had any implications on the business.
Breach of Partnership Agreement
Relationships between business partners can sour over time which may lead to a potential breach of contract by one of the parties. Any breach of contract will require a review of the partnership agreement and an analysis as to whether any of the terms were breached, which may lead to a business dispute.
Examples of when you may need to review a partnership agreement for a potential breach of contract include:
- Partner Has Taken Too Large of a Partner Draw. A partner may have violated the partnership agreement by taking too much money out of the business.
- Partner Fails Capital Contribution Requirements. A partner doesn’t live up to the capital contribution requirements outlined in the agreement.
- Partner Made an Unauthorized Decision to Harm the Business. A partner may have made a bad decision that he or she was not allowed to make, which could lead to a breach of contract.
Drafting Partnership Agreement Cost
Drafting a partnership agreement comes with costs, since it requires the time of a trained lawyer to complete the project.
ContractsCounsel’s marketplace data shows the average partnership agreement drafting costs to be $617.86 across all states and industries.
Partnership Agreement Review Cost
Hiring a lawyer to review a partnership agreement will come with fees. The lawyer will take time reading over the agreement to analyze the terms and consulting with the partners.
ContractsCounsel’s marketplace data shows the average partnership agreement review costs to be $555 across all states and industries.
How Do Partnership Agreement Lawyers Charge?
Business lawyers charge for services in a variety of ways. Depending on the complexity of the project, the lawyer will typically suggest fee options to the client.
Many business lawyers prefer to bill their time with an hourly rate. This means the lawyer will provide an hourly rate to be approved by the client and log time in a timesheet to be invoiced at the end of the project for time spent on the partnership agreement. This is typically the safest way for the lawyer to charge clients since they are covered if the assignment takes more time than expected.
ContractsCounsel’s marketplace data shows the average hourly rate for a business lawyer ranges from $250 - $350 per hour.
Flat fee billing structures are becoming more popular for contract drafting projects. Lawyers will provide a flat-fee to the client for services for approval. The benefit of flat fee billing is it provides certainty to the client on the total cost of the project. It is important to make sure the client knows what’s included with the fee before starting the project, as it may not include rounds of revisions.
ContractsCounsel’s marketplace data shows the average flat fee rate for partnership agreement costs to be $603.89 .
Get Help with an Partnership Agreement
Do you need help with a partnership agreement project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from business lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.