When California entrepreneurs begin a new venture together, they will need to choose the type of entity under which they will operate. For those who choose a partnership, it is crucial that they take care of all business formation matters promptly and properly. One of those tasks is to draft and execute a partnership agreement.
What goes into this agreement will dictate the relationship between or among the partners, how the business will operate, and under what circumstances the partners may amend the agreement. This document will also serve as the contract to refer back to in case a dispute arises. For these reasons, it is important to make sure that the partnership agreement contains as much detail as possible.
Every agreement should include certain basic information such as the name, location, purpose and length of the partnership. It should also include information regarding each partner’s contribution, how to distribute profits and losses among the partners. It would also be a good idea to include information regarding how partners leave and how partners join the partnership. Outlining the duties of each partner, the management duties and powers, and a standard of conduct also helps further define the relationship among the partners.
These are just some of the issues that need to be addressed in the partnership agreement. Creating this document would be considered by some as the most important part of the business formation process for the reasons listed above. Making sure to get it right the first time could help avoid costly and time-consuming disputes in the future, so it may be wise for California entrepreneurs to consult with an attorney when creating this agreement.
