Importance of Partnership Agreements in Business
No one wants to end up locked in a difficult dispute with a business partner. A partnership dispute could cause serious harm to the business. Every business partnership in California should have a comprehensive, well-drafted partnership agreement in place. An agreement serve two functions:
- A partnership agreement reduces the risk of a dispute; and
- A partnership agreement will protect your rights and interests if a dispute arises.
Partnership agreements should be customized to meet the unique needs of the business. At the same time, there are some key issues that should be addressed in all partnership agreements. Here, our San Diego business lawyer highlights the key sections that should be in your agreement.
The Finances: Contributions, Ownership, and Access to Distributions
As a starting point, your partnership agreement should clearly and thoroughly clarify all key financial matters. Among other things, this includes the initial and ongoing contributions made by each party, the ownership rights of each business partner, and when/how partners can take distributions from the business. While partnerships operating within the state are subject to the California Uniform Partnership Act, it is your written partnership agreement that will largely control your financial rights and financial responsibilities.
The Operations: Day-by-Day Business Management
Next, a partnership agreement in California should clearly state how day-by-day operations of the business will be handled. Do not assume that you and your business partner(s) will simply be able to figure everything out on the fly. Within a partnership agreement, there should be some structure in place for management of the business.
At its best, a partnership is a flexible business. The company can respond quickly to changing market conditions or immediate customer/client needs. At its worst, partnerships can get bogged down because the key decision-makers are not able to get on the same page. The partnership agreement can help facilitate better results.
The Conflicts: Dispute Resolution Procedures
Conflict is part of business. Even business partners that get along well could end up in a major disagreement. In fact, it is not uncommon for family business partners to get locked down in a conflict. For this reason, it is essential that a well-drafted partnership agreement includes detailed provision for dispute resolution. A protracted dispute could end up harming the business. There may be no “winners.” When drafted the right way, a partnership agreement can help facilitate an amicable resolution—perhaps through mandatory arbitration, voluntary mediation, or another form of negotiation. A San Diego partnership law attorney can help you put the right structure in place for your business.
Contact Our San Diego Partnership Law Attorney Today
At The Law Office of Kris Mukherji, our San Diego business law attorney is a skilled, experienced advocate for business owners and entrepreneurs. If you have any questions about partnership agreements, we are available to help. Call us now or send us a direct message for a strictly confidential consultation. With a law office in La Jolla, we provide business law representations to partnerships in San Diego and throughout all of Southern California.