Essentials of the Partnership Agreement in Colorado
A Partnership Agreement is also known as:
Business Partnership Agreement
General Partnership Agreement
Articles of Partnership
The success of your business partnership will depend on the foundational structures you put in place. These ground rules will be the principles that determine how and for how long the business runs, especially if disputes arise. A Partnership Agreement will help you establish the rules that will govern your partnership. While Partnership Agreements are not required by law in the state of Colorado, it is recommended and routine for the survival and success of the business partnership.
A Partnership Contract refers to the contract established between two or more people/business partners with the intention of establishing the responsibilities, rules, roles, and relationships for (and between) the partners. The Partnership Contract covers important aspects such as the distribution of profits and losses, while outlining the processes to be followed (governing guidelines) on matters such as withdrawal/cessation of partnership and financial reporting, among other functions.
The good news is that you don’t have to hire a lawyer to help you through the particulars of the Partnership Agreement, thanks to our free Colorado Partnership Agreement form. This form is structured in a simple format that you can download, edit, print and e-mail. You don’t have to get the document notarized for it to be enforceable. All it requires is the signatures of the partners.
Some of the clauses in a Partnership Agreement in Colorado are explained below.
Review of the Partnership Terms
In addition to naming the business partners and listing the partnership’s date of formation, this section also reviews and lists the different activities of the partnership, the duration/term of the partnership, as well as the purpose of the partnership.
Allocation of Profits and Losses
This section outlines the allocation of profits and losses between the partners, whether the profits and losses of the partnership will be shared equally or based on the cash and the capital contributions of each partner.
Management and Authority
In this clause, the management of the partnership is outlined, with the designated Managing Partner and his/her role is outlined. Often, the designation of the Managing Partner is based on experience, but the managing partner may also be determined through voting – majority or unanimous vote.
Besides the Managing Partner, the Tax Matters partner is also named in this section, and his/her role and responsibilities outlined.
This clause also stipulates the authority of the members to ensure that other partners are protected from liability should a partner act in a manner that could bind the partnership. For example, partners with authority to enter into binding contracts with other individuals or companies, on behalf of the partnerships are named. Limitations to the authority given are also clarified, as well as the conditions to be met before getting into such contracts.
This clause stipulates the conditions for voting, whether different things will be approved via unanimous or majority voting. Voting and voting powers could also be determined proportional to profit shares, contributions, or each partner could have an equal vote.
With disputes being the leading cause of failed partnerships, your legal Partnership Agreement template also comes with a dispute resolution clause. Dispute resolution is crucial, and recommend to include a mediation clause to ensure the professional resolution of disputes among partners.
What conditions should a partner meet before withdrawing their partnership? How is the partner’s share handled? Can a partner’s stake be bought by the remaining partners? Would a Managing Partner’s withdrawal of partnership necessitate the dissolution of the partnership? These are the types of issues addressed in a Partnership Agreement.
The Partnership Contract stipulates the conditions that would necessitate dissolution of the partnership. These conditions would include:
Dissolving the partnership on an agreed end date
Achievement of the partnership’s goals/Completion of the project
Death of a partner
Withdrawal of a partner
Whether you are entering into a business partnership in Boulder, Aurora, Denver, Brighton, Castle Rock, Grand Junction, Lafayette, or any other city in Colorado, download our free Partnership Agreement form to get started.