A partnership agreement is not only necessary but also obligatory for the two parties that will hold the partnership. Does it really play an important role like it sounds? Well, the main purpose of making a partnership is to help each other so that businesses can be handles smoothly. However, things can happen out of the plan, so that a partnership agreement should be written out in order to give protection for the two parties that are bound by the partnership agreement.
How Can the Agreement give Protection?
Just like any other kind of agreement, a partnership agreement will write and explain everything in detail so that the parties that are involved in the partnership understand each role in the business, as well as know the border to limit their actions. No matter if the business partnership will be held with best friends or a close relative, a clear explanation that is put in the form of a partnership agreement is obligatory to make. The agreement will guide the parties to follow the scenario of the partnership so that everyone can play his own role based on the expectations stated in the agreement. Moreover, the agreement helps everyone to minimize any possible conflicts in the future because all the things are clearly explained in the agreement.
What should the Agreement Cover?
• The name of the partnership
• The complete address where the company is located
• The complete names and addresses of the partners involved in the business
• The date when the agreement will come into effective.
• The main purpose that leads to the partnership
• Any voting requirements that make the partnership happen. The voting is done by following three principles, the voting right is drawn based on the ownership percentage, all partners have the same voting right, and the voting should be anonymous vote so that no one will know another person’s opinion.
• The percentage of all costs to be shared during the partnership
• The percentage of profit that will be shared to the parties
• The name of the partner that has the legal right to sign any check from the account under the partnership.
• The frequency of the finance audit during the partnership
• The contribution account that the partners should have
• The accounting records that are related to the partnership activities
• The end-of-the-year fiscal from the partnership
• Any consequence that should be taken just in case the partners leave the partnership before the end of the partnership period.
It could be more or it could be less points that can be put in the agreement. It depends on your company interest. Use this template below as a reference. You should ask for legal opinion to have a more professional one.