What Is a Partnership Agreement Review?
A partnership agreement is crucial to company management. A partnership agreement review ensures that your document is legally valid and covers all necessary elements to run your business effectively.
Whether starting a new company or expanding your own, a partnership agreement review ensures that every party benefits from the arrangement.
Partnership agreements help manage business responsibilities and set rules for leadership and organization. While many aspects of partnership occur outside a contract, a legal agreement helps protect each party’s investment and avoid conflict.
By conducting a partnership agreement review, you can ensure your working relationship is mutually beneficial and secure. In addition, it ensures the welfare of your company, and it can outline liabilities for particular partners to avoid shared losses or damages.
Here is an article that defines a partnership.
Who Can Review a Partnership Agreement?
You can review your state bar association’s website for details on what to include in a partnership agreement. There are also many templates and samples online that provide an excellent example of a partnership agreement.
That being said, personal reviews cannot account for many of the legal necessity agreements have. Therefore, if you want to protect your business and investment truly, then it’s best to find a licensed business lawyer to review your partnership agreement.
Working with a lawyer also allows you to benefit from their expertise. For example, you can ask them questions about your agreement, including implementing certain terms and conditions that bolster each partner’s protection.
A lawyer can also determine if a partnership agreement needs more details or provisions to protect the best interests of all parties. Partnership agreements should have all parties' best interests regardless of their role or designated title.
Here is an article with ContractsCounsel’s guide to partnership agreements.
What Should be Included in a Partnership Agreement?
Partnership agreements will vary by scope and scale. For example, two individuals entering a general partnership will not have the same legal requirements or liabilities as two corporations. To determine the correct elements for your partnership agreement review, make sure that you choose a form that suits your business’s structure.
All partnership agreements should include the following:
- The information about each partner
- The role and ownership rights of each partner
- Profit and loss distribution
In a general partnership, liabilities, profits, and losses are evenly distributed. Still, you may not always want that to be the case for your business.
Limited liability partnerships separate profits and losses among parties, offering greater legal flexibility and protection.
A partnership agreement should include management and voting rights and details on how partners can be added or removed from the business. Since not every partnership works out, having this clause can make the relationship dissolution less stressful and, in some cases, avoid having to go to court.
A comprehensive dispute resolution agreement is also a valuable addition to your agreement; it outlines how partners agree to handle future conflict and the steps they must take to resolve any disputes they have with each other. This ensures that dissolution or dispute remedies will be in everyone's best interest if you and your partner cannot come to a solution.
Here is an article where you can read more about partnership agreement requirements.
What is the Purpose of a Partnership Agreement?
Partnership agreements create a legally binding contractual relationship between business partners. Having a contract in place means you can legally enforce their responsibilities to the company. Without a legal contract, no one can prove another party’s obligation or require them to do anything for a company.
The main purpose of a partnership agreement is to establish mutual agreement and understand each party’s role in the business. Another purpose is to limit liabilities for parties in some cases potentially.
Since all roles are clearly defined within the agreement, misunderstandings of the responsibilities and roles each person is expected to fulfill are less likely.
A partnership agreement review ensures that your agreement does everything you want it to. For example, working with a lawyer, you and your business partners can reach the most desirable terms for your working relationship.
Here is an article with tips on legally forming a business partnership.
How Much Does It Cost to Review a Partnership Agreement?
Partnership agreement costs vary by lawyer and contract. Some lawyers charge more for their services, often higher prices for corporate attorneys and partnership agreements between large companies.
Suppose you are a small business owner or startup founder. In that case, you can look for a business lawyer specializing in startup and small business practices. They can perform a partnership agreement review for a lower rate. You can also work with a lawyer who has a set fee schedule and is willing to work with you on an ongoing basis for a lower rate.
Most lawyers charge between $200 to $500 an hour. However, you can get free bids for your partner agreement review on ContractsCounsel’s legal marketplace.
Here is an article with more information on average partnership agreement pricing.
Who Needs a Partnership Agreement?
In the event of a dispute, a partnership agreement can help your business avoid a lengthy legal battle and financial losses.
From an operational standpoint, the agreement clarifies who makes what decisions and each partner’s roles and responsibilities within the business.
Another important reason to get a partnership agreement is to control your business's operations completely. Your business will adopt your state’s default partnership rules and legal liabilities without a written agreement. While this may work in some situations, most business owners want a say in how their business operates.
Here is an article with seven reasons your business should have a partnership agreement.
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