What Is A Partnership Agreement And Why Is It Important

If you do not have a partnership agreement, contact Claire Daly on 028 8775 2990 or email claire.daly@cavanaghkelly.com to discuss how we can help you create this important document; doing now could save you time and money in the future. The reason why it is important to have a written social contract is that, if there is no written agreement, the provisions of the law that are more than one hundred years old apply and the standard position defined by law may not be attractive to partners. If one partner wants to end a partnership, it can cause considerable difficulties in the other case. A partnership agreement should define how to dissolve the business or transfer a partnership. Partners often work together because they trust each other and have fun working together. Some put in their contracts a clause stating that a partner cannot sell his shareholding to a third party without offering the remaining partner of origin the opportunity to buy the other. In other cases, partners may need an authorization before they can sell to a particular party. Several partnership agreements protect partners in the event of a partner`s death. In many general partnerships, the partnership usually ends with the death of one of the partners.

Other partners can develop a new agreement. Some partnership agreements deal with the rights of heirs, with some agreements allowing the remaining partners to purchase the deceased partner`s share instead of allowing a spouse or child to become a partner. Partnership agreements can specify who owns assets, for example. B the name of the company, the list of customers or the revenues when the company is dissolved. If two partners who each own 50% of a company disagree, this can create problems for which one partner makes decisions without the other`s consent. Even if one partner is a majority shareholder, both partners can make decisions without the consent of the other, unless a partnership agreement limits their own authority. An effective partnership agreement limits the decisions each party can make or transfers control of the activity to one of the partners. The agreement may contain, for example. B, a clause that no partner may issue or modify more than one amount, add or modify products or services, relocate the business, sell to a new partner, hire or fire key personnel, or close the business without the other`s written permission. Here are some of the main reasons why a company should have a partnership contract: provisions should be included in a written partnership agreement for the acquisition by the remaining partners of the outgoing partner in the partnership in the event of death, retirement or expulsion of a partner. A written partnership agreement should contain provisions for the protection of minority partners.

Such a clause, the « tag along » provision, protects minority owners in the event of a third-party purchase.