California Partnership Agreement Attorney
A California partnership agreement is a contract between partners in a partnership. The agreement specifies the terms and conditions between the partners including, but not limited to, the following:
- Percentage of business ownership
- Distribution of profits and loses
- Term of the partnership
- How the partnership can be dissolved
- How a partner can buy his/her share of the partnership
A partnership agreement should be prepared before a partnership business venture is formed. Forming a partnership with another person or business is dangerous without having a written agreement. In the absence of a partnership agreement, California’s default rules regarding partnerships will apply (example – The California Revised Uniform Partnership Act/ California Corporations Code).
If you are currently involved in a partnership or considering forming one, consult with a California partnership agreement attorney to learn how to protect your business interest. Without a clearly defined agreement in place, minor disputes could escalate to legal problems.
California Partnership Agreement Overview
A California partnership agreement provides a firm understanding of a business relationship between two or more individuals or businesses. The partnership agreement should identify how business profits are to be divided, the rights and responsibilities of the partners, and the procedures to follow when a partner leaves the business or to dissolve the partnership.
Unlike corporations and limited liability companies, a partnership is not a separate legal entity apart from its owners. The partnership business form does not shield partners from the debts and liabilities of the partnership.
Key Partnership Agreement Clauses
- Partner Contributions
When forming a California business partnership, clearly identify how much each partner must contribute to start the business and each partner’s future financial responsibilities for the partnership. The partnership agreement should detail the amount of money, time, and effort each partner must contribute.
- Partner Distributions
The partnership agreement should detail how partners will split business profits. The agreement should specify the order in which each partner will get paid and define the type of salary each partner shall receive after business expenses are paid.
- Ownership Interest
The agreement should clearly define ownership interest. For example, the agreement should the profit each partner shall receive if the business is sold, how new partners can enter the partnership, and the options of buying out another partner. You may also want to consider adding in a nondisclosure clause to prevent sensitive business information from being shared with the public upon a partner’s departure.
- Business Operation Decisions
It is rare for most partners to completely agree about business operation decisions. The agreement should define how day-to-day management and long-term decisions will be made. Clearly identify what types of operational decisions require a unanimous vote among partners. Set up a clearly defined decision-making structure to be incorporated into the agreement.
- Dispute Resolution
Every partnership agreement should detail how disputes among partners should be resolved. The resolution process may include mediation and arbitration language. The last thing any partner should want is for a business dispute to go to court and become a public record.
- Partnership Dissolution
It is common for partnerships to end within the first five years of operations. The agreement should specify the steps the partnership should take to legally end.
Hire a California Partnership Agreement Attorney
Contact San Diego Esquire for more information about our California partnership agreement drafting services. We can help you draft or review a partnership agreement for your business.