Ted and his college friend, Malcolm, developed what they felt was a great idea for a new business. As they worked out the details, someone mentioned the importance of partnership agreements. Ted wasn’t sure. He and Malcolm were on the same page about virtually every aspect of their business. How could a partnership agreement possibly enhance their business relationship?
Business Structure Is Important
When entrepreneurs contemplate starting a business, they typically consider what type of business they will form. The business structure, or business entity, chosen will affect other aspects of the business, including the cost of formation, operations, and taxes.
Business entities include:
- Sole proprietorships
- Corporations
- Limited Liability Companies
- Partnerships
Some business entities exist in different forms, like a general partnership and a limited partnership. Each entity carries its own paperwork requirements.
Trust Only Goes So Far
People forming a partnership may start out with high hopes and cooperative spirits. As they delve more into the actual formation and operation of the business, however, their relationship may begin to fray at the edges. Eventually, large schisms could occur between partners over how the business should be run.
It is wise to have a written agreement in place that addresses procedures and disagreements. A partnership agreement could be the difference between losing your investment in the partnership and experiencing long-term success.
Protections Contained in Partnership Agreements
Putting certain provisions and agreements in writing can help protect the partners and the partnership itself. Partnership agreements may contain some or all of the following provisions:
- Dispute Resolution, which may require the partners to use mediation or arbitration to settle certain disagreements.
- Termination of Partnership, to guide the partners through a painful breakup.
- Removal of Partner provisions allow the partnership to remove a disruptive partner.
- Protection for Both Majority and Minority Partners, because the partnership may take actions that hurt either group.
- Non-Compete provisions help protect the partnership from former employees or partners.
- Confidentiality agreements designed to protect the partnership’s proprietary information.
Florida partnership laws can guide you to include appropriate language and avoid using provisions that violate those laws. As with any business transaction, it’s in your best interest to have your legal documents reviewed by a business attorney.
Discuss Partnership Agreements with Your Florida Business Lawyer
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. we represent clients throughout South Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, and surrounding communities.