What are Some Important Sections in a Partnership Agreement?

A partnership happens to be one of the best ways to share financial risk and responsibilities, diversify products and services, get access to new markets and infuse new capital into a business. A partnership agreement is a legally binding agreement that is signed between two parties or more. In such a contract, both parties agree to share losses incurred and profits earned through the business. Know about some of the important sections that are there in a Nevada partnership agreement.

Length of the Partnership

Partnerships can keep operations continued for an unspecified length of time. However, there are a few cases where a business is created in such a way as to end or dissolve upon reaching a particular period or a certain target. This information should be included in a partnership agreement, even in case the time frame is not mentioned.

Authority

The agreement must also define the binding power or Partner authority. A business can be exposed to a level of risk that cannot be managed if it is bound to a contractual agreement or debt. The occurrence of this possibly expensive circumstance can be prevented with a partnership agreement that contains all the vital terms associated to which of the partners has the authority for binding the business, as well as the process to be undertaken in such kinds of situations.

Death or Withdrawal

The agreement should also make a mention of the rules to deal with the departure of a partner because of situations such as withdrawal from business or death. You can easily find a partnership agreement template online that mentions the same. Such kinds of terms might include a sale or purchase agreement, which deals with the process of valuation. Or it might need each partner to maintain a life insurance policy that mentions as beneficiaries the other partners in the business.

Decision Making

Some of the conflicts in a partnership that tend to arise most often are due to disputes between partners and decision making. In a partnership contract, all the terms associated to the process of decision-making is elaborated. This can be a method to implement checks and balances among the business partners or a system of voting. A partnership agreement, apart from the process of decision-making, should also comprise of directions on how disputes should be resolved between partners. It is generally achieved with a clause for mediation in the contract, which is supposed to offer a way to get disagreements among partners resolved with no need for the court to intervene.

If you wish to establish a solid partnership, a proper partnership agreement is what you need to start with. A proper contract can mention all the expectations of each partner, and help avoid unreasonable or unrealistic assumptions. While getting such an agreement prepared, it is also a good idea to get the assistance of a qualified lawyer, if your situation is more complex and some elaborate changes have to be made to a standard partnership contract. If that is not the case, it can be enough to use a regular business partnership agreement sample that can be found on many of the websites out there. You have to choose one that matches your type of business – whether proprietorship, limited liability or any other type, and use it for your own requirement.

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