When running a partnership, there are many decisions to be made. More importantly, these decisions should be reduced to writing in a comprehensive partnership agreement. Whatever the partnership agreement lacks will be filled in by the default statute, which in Florida would be the Florida Revised Uniform Partnership Act. In many instances, the statute contradicts what the partnerships would otherwise want. That is why a partnership must have a comprehensive agreement that encompasses not only daily issues, but also contingencies. At the very least, the partnership agreement should have the following clauses:
Allocation of Profits and Losses. In Florida, the default allocation of profits and losses is equal among all partners. It does not take into account whether or not the partners contributed different amounts. Therefore, a proper partnership agreement must include the allocation of profits and losses in the partnership.
Authority. In Florida, the default rule states that all partners have equal authority in binding a partnership. It does not take into account whether or not the partners have agreed otherwise. A partner may subsequently bind the partnership for a decision that was not in the best interests of the partnership, leaving the partnership liable.
Contingencies. A good partnership agreement will take into account contingency scenarios. The most notable of such scenarios is the death of a partner. Depending on statute, the death of a partner or dissociation of a partner may end the partnership. Although that is not the case in Florida, it is important to consider all contingencies that would prepare the partnership for any situations unanticipated.
Dissolution. The partnership agreement should take into account what events would cause a dissolution. This may be such events as the dissociation of a partner, uncontrollable losses, or any other event the partners agree upon.
Duration. Partners must consider whether or not the partnership should be for a term or for an at-will, or perpetual, duration. This can have ramifications on how the partnership may dissolve.
Percentage of Ownership. A partnership agreement must disclose the percentage of ownership of each partner. Usually, these contributions will then determine the profits and losses. The tricky part of percentage of ownership is it is not always clear. A partner may contribute labor, while another contributes capital. In such a situation, you must reduce to writing who owns what percentage of the partnership.
Decision-making. Partnerships must take into account what is required of decision-making. Each partner may be given a different amount of votes towards any decision. Decision-making authority may also refer to what vote is needed to pass each type of decision by the partnership. Many factors go into the decision-making abilities of a partnership.
Resolving Disputes. Despite everything else a partnership agreement can cover, sometimes you need procedures for contingencies. There may be deadlock or there may an issue whereby a decision had to be made that was not contemplated previously. A good partnership agreement should cover what would happen in such a situation.
In sum, a good partnership agreement should cover the many aspects of a partnership. This list touches upon the major tenants of a partnership agreement, but there is much more to discuss. Consulting with an experienced business attorney can help you best prepare your partnership agreement. Call the Trembly Law Firm at (305) 431-5678 today to schedule your consultation.