A business partnership agreement is a legal document that governs the terms and conditions for individuals to conduct business as partners. It outlines the duties and responsibilities of the partners, and also defines the scope of activity for the partnership. It is basically a contract among the various partners that provides legal enforcement for the terms of the business operations.
The business partnership agreement may be referred to in instances of dispute or legal contention regarding the activities of the business and the partners. In the event of a lawsuit or a violation, the court may examine the agreement to determine the partnership’s information and stance on certain legal issues.
What Is Contained in a Business Partnership Agreement?
A partnership agreement should be clearly written and should include precise details regarding the company’s activities. It should include:
- Information regarding each partner (names, contact information, etc.)
- Duties and responsibilities of partners
- Allocation of profits and losses for the partners (these are typically equal amongst partners)
- The scope of the partnership’s functions and activities
- The goals and mission statements of the partnership
- Restrictions on management and leadership
- Instructions regarding termination and dissolution of the partnership
In addition, some partnership agreements may contain a clause defining what should happen in the event of a legal dispute. For instance, the agreement may state that legal disputes may be resolved by lawsuit. Or, the agreement may state that the parties must seek alternative methods first such as dispute resolution or mediation. This all depends on the preferences of the parties.
Who Owes a Fiduciary Duty in a Business Partnership?
Depending on the setup of the business partnership, the person who owes this duty differs. In general and limited partnerships, each general partner owes a duty of fiduciary duty. This is because in general and limited partnerships, anyone who manages the partnership has a direct impact on the best interests and goals of that partnership. ??
In limited partnerships, limited partners merely contribute capital for the partnership’s formation. Thus, they do not have any “say” or management capabilities. This means that these limited partners leave all management duties to the general partners. For this situation, these limited partners do not owe a fiduciary duty. However if an alleged limited partner starts to have some sort of management control, the court will view that partner as a general partner with fiduciary duties.
Can a Partnership Be Changed or Amended?
In most cases, a partnership may be changed or amended at the agreement of all the members. Voting procedures may be instituted for determining which changes can be made to an agreement or not. This may be important for many partnerships, since the needs and requirements of the partnership may change over time. This is especially true if the partnership has experienced large amounts of growth. In such cases, the agreement may need to be reworked in order to reflect the new aims and needs of the organization.
What Are Some Business Partnership Disputes?
Some common disputes related to business partnerships are:
- Breach of business contract
- Violating a non-compete clause or similar contract term
- Unauthorized disclosure of confidential company information
- Violations related to insider trading
- Breach of the business partnership agreement itself
Business partnership disputes can also involve various other legal issues. For instance, there may be disputes as to which partner can be held liable for a product liability claim or for a customer’s injury. These types of disputes may often require extensive legal research to resolve.
How Are Business Partnerships Terminated?
Terminating or dissolving a partnership usually occurs if any of the partners become incapacitated or if they become deceased. This can limit the potential longevity of a partnership, since the business arrangement may terminate unexpectedly if something happens to just one partner.
Do I Need a Lawyer for Help with a Partnership Agreement?
Partnership agreements can often be complex legal documents. It is in your best interests to hire a business lawyer for help with a partnership agreement. Your attorney can help you draft the document, and can also review the agreement for accuracy. In the event of a legal dispute, your lawyer can go over the partnership agreement to determine your rights, and can represent you in court as needed.