San Diego Partnership Agreement Attorneys

A Partnership Agreement is an important business contract which establishes the intent of the business partners and the manner in which they will conduct their business or activities.  An effective partnership agreement should establish clear definitions of the roles and responsibilities of each party, and how profits are to be divided among the partners.  The partnership agreement should provide the authority to manage the partnership and to make important decisions including the establishment of the “partnership representative” for IRS audits and tax purposes.

Core Issues in an Effective California Partnership Agreement

A well crafted partnership agreement should create the legal entity to protect the individual partners and guide them through the course of their mutual business relationship.  This vital business contract should reduce or eliminate the potential for disputes or lawsuits between the partners and address how a partnership interest will be handled in the event of an unexpected illness, incapacitation, divorce, personal bankruptcy or the death of an individual partner.

The core issues which should be addressed by the partnership agreement include the purpose of the partnership itself and the term of the partnership agreement (even if this is to be ‘perpetuity’).  The agreement should address the addition of new partners and the circumstances required to expel a partner or buy-out their interest in the partnership.  What are the initial capital contributions of each partner and will they take the form of cash, intellectual property, real property, fixed assets or services?  How will additional capital requirements be met in the future?

The partnership agreement should stipulate how profits are to be divided and who will have signatory authority over partnership accounts.  Who will be responsible for keeping the books?  How much time is each partner expected to give to the efforts of the partnership and who will manage the daily business activities and decisions?  How will decisions be made and what are the voting rights of each partner?

The partnership should also give consideration to a Buy/Sell Agreement to address the value and process to transfer a partnership interest in the event of a divorce, bankruptcy, incapacitation or death.  Without these important considerations an event could result in the partnership enduring a partner they did not choose or worse, the automatic dissolution of the partnership.

The Cost of a Downloaded Partnership Agreement or the Failure to Create a Written Contract

Why is it important to work with the experienced partnership agreement and business contract attorneys at the Watkins Firm?  Many new partnerships attempt to use boilerplate forms downloaded from some legal website, or to create an agreement on their own.  In some cases there may not be any written agreement between the partners whatsoever.  This is a recipe for partnership disputes and ultimately expensive and time consuming lawsuits.

Downloaded boilerplate forms are exactly that – rough drafts of a legal document without the specific legal clauses and verbiage necessary to capture the essence of the agreement between the parties or to anticipate challenges in the future and provide for them.  The result is a vague document (or no document at all).  When a contract or partnership agreement is vague, there is plenty of room for disputes and disagreement.  When the underlying contract fails to fully address an issue or concern a judge must piece together the facts and understandings of the parties in a complex legal process which is exponentially more expensive than the modest cost of a well crafted partnership agreement.

Without a written partnership agreement, the rules established by California’s Revised Uniform Partnership Act (RUPA) will govern the partnership and any dispute which might arise.  All partners under RUPA are considered to be equal and would receive an equal share of the profits.  Each partner is 100% responsible for the debts or liabilities of the partnership under RUPA which means any single partner could be rightfully sued and held financially accountable for the entire liability of the partnership as a whole.

Contact Experienced San Diego Partnership Agreement Attorneys

The quality of your contracts will define the extent of your profits and your vulnerability to litigation.  Contact the experienced and proven business and contract attorneys at the Watkins Firm or call for a free consultation at 858-535-1511.  Our clients value the quality, substance and candor of our advice, and the cost-effective manner in which we serve them.

Protect your new partnership and the interests of each present and future individual partner with a well crafted and enforceable partnership agreement.