If you have entered into a business partnership or are contemplating one, you may be wondering whether you need a partnership agreement.

Small Business Partnership Agreement

A partnership agreement is a written agreement of two or more individuals who have decided to carry on a for-profit business. The agreement sets out the rights and responsibilities of each partner with respect to the business but can also provide for certain procedures, which may include among other things, the election of a managing partner, how partnership meetings will be conducted, and how the partnership can be terminated. Many aspects of a partnership, including the rights and duties of the partners are governed by the Partnership Act, but the Act is not comprehensive. You may wish to enter into a Partnership Agreement to deal with aspects of the partnership that are not covered under the Partnership Act or to opt out of the Act and establish your own set of terms that will govern your partnership.

Although it is not mandatory to have a written partnership agreement, there are benefits to having one in place, including being assured that you and your partner are fully aware of your respective rights and duties with respect to the business, which in turn may help avoid future disputes.

50/50 Partnership Agreement

If you and your business partner would like to equally share responsibilities for the business, you may choose to structure your agreement as a 50/50 partnership agreement. Under a 50/50 partnership agreement each partner shares equally in any profit or loss generated by the business, regardless of whether you have equally contributed to the business. Under these agreements, each partner also has equal decision-making power.  A 50/50 partnership is not your only option however. You could for example, decide on a division that reflects your individual contributions to the business.

How to Write a Business Contract Between Two Parties

As explained above, a partnership agreement can cover a host of issues. Further, it can be tailored and customized to fit your specific needs. Before drafting an agreement, some issues that you may want to consider include:

• the name of the partnership;
• specific contributions by each partner to the partnership;
• each partner’s authority to bind the partnership to debt or contracts;
• specific duties of each partner;
• the liability and indemnification of each partner;
• how to resolve disputes; and
• how decisions get made.

If you are unsure how to answer any of these questions, or if you are wondering how to legally sell your business, you may want to consult with a lawyer. MJ O’Nions will draft your Partnership Agreement for a low flat fee and provide you with the information and advice you need to confidently execute an Agreement that you and your partner understand and can rely on throughout your business dealings. Please contact us at 604-449-7779 for assistance.