A business partnership is like any committed personal partnership as you may expect, except that in a business partnership, the partners that make up the business partnerships need to have a clearly written agreement that clearly expresses their roles. expectations and how the partnership functions especially in 2021.
It is important to understand that when a decision is made by a partner or something happens with the partnership, or there’s a change or adjustment between partners, or there is a change in the partnership, every partner involved needs to be notified. With all of these in view, a partnership agreement is the best way to ensure that the business partnership, at least, the personal part of the agreement—of the business relationship survive.
- 1 What is a Partnership Agreement?
- 2 Five Important Partnership Checklist
- 3 Types of Partnership Business
- 4 Conclusion
What is a Partnership Agreement?
A partnership agreement is a binding contract between two individuals, private parties, or entities that creates mutual legal obligations. A partnership contract can be either oral or written and may include clearly defined terms and conditions of the partnership between the partners involved in the agreement.
Five Important Partnership Checklist
1. Percentages of Ownership and Distribution
The concept of having a clear percentage of ownership and distribution is very important to have a successful business partnership. The percentage of ownership and distribution can make all the difference when it comes to crafting a successful business partnership.
The percentage of ownership can set the boundaries for what may come when the partnership becomes bigger or grows into a partnership that may require some form of expansion. In which case, you may have to bring in additional partners to help take the business to the next level.
2. Terms of the Partnership
The terms of the partnership need to be understood from the place of secured partners’ agreement. One that everyone can agree on without any issues that can later affect the partnership negatively. It is important to note that having a letter of intent for a business partnership can sure go a long way to helping create understanding with the partners.
The letter of intent for business can also create a sense of belonging not just for you, but the rest of the partners who have come together to make up the business partnership. When you are part of s small business partnership, you may as well take part in the little details to fine-tune all that goes into creating a successful business partnership.
3. Safe Partnership Termination
It is important to have a safe partnership termination in case issues arise that would make that a possibility. The different areas of safe partnership termination may involve other business agreements, learning business partnership protocol and general partnership business can definitely go a long way to make all the difference.
Creating a successful business partnership also requires you to understand that there are bad business partnership examples and how all of those play into the bigger picture. Learning how to take these different steps in ensuring that you take care of a recent business partnership can go a long way in helping put things in the right perspective for you.
You may want to consider buying your share of the partnership if you can afford to. There may come a time when you may have to consider taking a stance on buying your share of the partnership. This is because it just might be the only option you have when it comes to either choosing to let go, or at least get some money back for your hard work.
5. Flexible Partnership Agreement
There should be partnership agreement flexibility that you should be able to get back to and make necessary changes for. The level of flexibility you have and put into the partnership would reflect your commitment to growing it. It is important to understand the reasons for flexibility so that you are prepared for whatever comes in the process.
Partnership may undergo different challenges, but being flexible would help you take the lessons and turn them into something that you can learn from. The reason for flexibility is not just for you, but for the group. Each member brings a level of flexibility and together, it can account for so much more.
Types of Partnership Business
There are essentially four types of partnership business you can form, and we have outlined these partnerships below, so you know what partnership is suitable for you and your partners. What you have to bear in mind before starting any partnership is that you are not the only one who is going into this arrangment, as such, you have to ensure everyone is on the same page.
LLC Partnership (Multi-member LLC)
A limited liability company (LLC) An LLC, or Limited Liability Company, is the combination of the best parts of what obtains with corporations, a sole proprietorship, and business partnerships into one business entity offering owners liability protection, joint flexible management structure, and to a large extent, some certain tax advantages as it were.
If you choose to have an LLC, agreement, members who make up your partnership have a legal protection that offers shielding between their personal assets and the business, this essentially means that they are generally are not responsible, or cannot be sued for the company’s dealings, actions or inaction that resulted to damages, loss, or debt. This is especially true, even if they had a prior knowledge that the partners have been negligent or made management decisions that led to a lawsuit or worse.
2. Limited liability partnership (LLP)
A limited liability partnership (LLP) is a type of partnership that operates in a way that the owners not actually made responsible, or held personally responsible for the partnership’s loss, debt and obligations or the actions of other partners. However, this situation does not extend to cases where negligence on the part of the partners have led to a loss suit.
This same arrangement has some elements of the LLC, except that it different in other ways. One of the areas where you can see the difference between LLC and LLP is the fact that partners can be held responsible for negligence in the case of an LLP agreement.
3. Limited partnership (LP)
A limited liability partnership (LLP) is a one where, though the owners of aren’t held personally responsible for the business’s debts and obligations or the actions of other partners in any given legally-contracted partnerships, however, in this case of Limited partnership (LP) partners can be held responsible for their own negligence, just like in Limited liability partnerships, if any members of the partnerships have acted wrongly.
4. General partnership (GP)
General partnership is quite different in many ways, unlike the other types of partnerships we have touched upon. In General partnerships,there is really no cut out rules or regulations require you to register with the state, or for you to have a clearly defined written formal agreement. However, If you plan on another partner to be involved in conducting business together, then you are naturally considered general partnership.
The decision to enter a business partnership definitely requires much more than just writing a contractual agreement. The process starts from your decision to ensure that you are prepared to give it whatever it requires for you to be able to take your partnership to the next level. You have seen different areas of trust that is required to have a successful business partnership.
The year 2021 has definitely added to the changing dynamics of business partnerships. Knowing just how to navigate the business challenges that you are likely to face as things get even bigger than you envisaged. Finding ways around how you can make the process of staying committed to your partnership a seamless one can go a long way in making your business partnership a successful one.