During the planning stages of your New York partnership, you should prioritize setting up a partnership agreement. This legal document details each partner’s responsibilities and can prevent future legal action. In addition, this guide will help you determine which terms to include in your agreement.
Basic facts
Your agreement should lay out essential business law facts. These include:
- Name of the company
- Name and address of each partner
- Specific business type
- Location of the company
Ownership percentage
Each partnership agreement should include which percentage of ownership each partner holds. The amount of capital each partner puts into startup costs typically determines the percentage of ownership. Still, services and expected contributions may require certain partners to have a larger percentage of ownership.
Length, buyout and dissolution
If your company will only operate for a specific time, you should include that time limit in the partnership agreement. Other information concerning buyouts and partnership dissolution should also factor into the accord. Specifically, you should consider the following:
- Any event that may automatically trigger a buyout
- Alternatives to buyouts
- Valid buyout entities
- Method of dissolution
- Asset distribution upon dissolution
Profit and loss division
The partnership agreement should specify which partners face responsibility for financial losses and how much each partner can gain from financial profit. Even if the responsibility gets divided along the same percentages as ownership, you should specify this fact in the agreement.
Decisions and disputes
All partnerships will eventually face disagreements. Your partnership agreement should lay out a plan to resolve these disputes. You should also specify the procedure for everyday decision-making of your company. You can reduce potential conflicts by clarifying which partners can make decisions.
Every partnership will have its challenges. Drafting a comprehensive partnership agreement helps to reduce the chance that these challenges will end your company.
