In short, a partnership agreement is a legal document that directs how a partnership will operate. The document helps ensure business success in that it allows you to run your business in the manner in which you want to. In its absence, your partnership’s operations could be governed by your state’s partnership laws. Please contact the McWilliams Law Group now and get the skilled business advice that you and your company deserve.
What is a Partnership?
A general partnership is a business entity composed of two or more persons (usually not a married couple). The “persons” are referred to as partners and they agree to contribute money, labor, and/or skill to the business. Each partner shares the profits, losses, and management of the business and each partner is personally and equally liable for debts of the partnership.
With regards to federal taxes, the business is required to file a partnership return. Any income or loss goes to each partner based on how much of the business that partner owns.
What is a Partnership Agreement?
A partnership agreement is a legal document that outlines or sets forth how a particular partnership will run. It contains basic information like the company’s name and its contact information. But it also includes provisions that address the partnership’s:
- Ownership,
- Decision-making,
- Capital contribution,
- Profits and distribution,
- Withdrawal or addition of a partner, and
- Death or disability of a partner.
Do You Need One?
Most often, yes. If you don’t draft a partnership agreement, your company’s operations are controlled by your state’s partnership laws. These laws set forth a standardized approach to running a business and are not customized to your unique partnership and style of business management. As a result, they can produce results that you don’t necessarily want.
In addition, an agreement is invaluable in that it forces the partners to come together, prior to drafting an agreement, to discuss how they foresee the company operating. This helps all partners get on the same page about the partnership’s functioning and how difficult decisions should get made. Disagreements almost always take place when running a business, but an agreement will help minimize these disputes and provide clear directions when they do arise.
Contact The McWilliams Law Group for Help
When you are ready to open a new business or take your current business to the next level, the lawyers at The McWilliams Law Group are here to help. We can help ensure that your operations provide you with the tax and liability protections that best fit your short- and long-term plans. Our attorneys work closely with business owners throughout Washington and California, providing individualized and strategic advice to help their businesses run smoothly. Contact us now and get the skilled business advice that you deserve.
