Everything You Need to Know About the Essentials of a Partnership Agreement in Florida
Legally, a partnership is formed the moment two or more people/ organizations agree to do business together, sharing in the profits and the losses of the business. The partnerships are governed by the state laws, with the laws varying from one state to another. In Florida, the creation of a partnership agreement is not mandatory, but it’s recommended. To ensure that the parties getting into partnerships do so the right way, the state laws under Title XXXVI 620.1110 give the general layout to guide the general operations, as well as the governance of the partnerships.
The state also recommends the creation of this document, especially among the individuals wishing to prevent and avoid confusion between partners, where partner relations are concerned, and also between the partnership and the partners.
Since the partnership agreement is not required by law, you don’t have to get the document notarized by the notary public for it to be enforceable. At the same time, the process involved in the creation of a partnership agreement (also a business partnership agreement, partnership contract, or a general partnership agreement) isn’t complicated, and it doesn’t require the involvement of a lawyer. You can create an enforceable business partnership agreement in Florida with ease and at the comfort of your office or home using our free Florida partnership agreement form.
The legal partnership template offered also covers all the important sections which carry the clauses governing the operations of the partnership.
Importance of a Partnership Contract in Florida
This contract overrides the default state rules in ways that suit and benefit the needs of the partnership. For example, in situations where the default state laws note that all partners are entitled to equal profit shares, proportionate to their capital investments, the partnership contract would override this by allocating a partner with valuable expertise a greater chunk of the profits.
The partnership contract further clarifies the process through which partners leave the partnership without causing the dissolution of the partnership.
In essence, the partnership agreement lays out the guidelines to be enforced by the partners to ensure the continuity and the success of the partnership. All matters affecting the partnership from profit/ loss sharing and voting rights to termination and buyout procedures are covered and governed by the clauses in the agreement.
Essentials of a Partnership Agreement
Our free partnership agreement template gives an overview of the important elements of the partnership contract. These elements/ key items are important in the contract you are going to sign, regardless of the size of the partnership. They include:
Financial Rights and Obligations
This is a critical element of the business partnership agreement outlining how much each partner’s contribution is, the ownership stake of each partner, and the partners’ share of the profits and losses.
Profit/ loss allocation is important, and the agreement stipulates the profit-sharing structure to the implemented – whether the allocation will be based on capital contributions or if all the partners will have an equal share of the profits.
The partnership contract also outlines and specifies the roles that an individual partner can undertake on behalf of the partnership and the other partners, while also outlining the limitations of these partners. For example, the managing partner may be tasked with the day-to-day operations of the partnership, but there are moves this partner cannot make – same with the tax representative.
This clause has the provisions to guide the partnership on decisions and moves that can only pass through a vote, as well as the items that require a majority or a minority vote. This section also contains a clause on the voting rights held by each partner.
Involvement and Competition
We hear about partners suing each other because of competition and in worst cases, the dissolution of the business because of competition. To save yourselves from such scenarios, the partnership contract must layout specific regulations regarding the involvement of the partners in the business (in terms of time) and also that they shouldn’t engage in any kind of business venture that competes with the partnership business directly.
Essentially, the partnership contract should include a mediation clause that would be used to compel the partners to come to an agreement, in the event of a conflict. This clause also saves the partnership from the lengthy court process.
Withdrawal or Death of Partner
The partnership contract also contains a clause that guides and governs the operations of the partnership should a partner withdraw their partnership interests or die. This section provides for matters like property division or the continuity of the partnership and the involvement of the heirs or the beneficiaries of the estate for the deceased.
Dissolution of the partnership
What will bring the partnership to an end? Is buyout an option, and what are the buyout procedures and terms acceptable?
Often, a partnership is dissolved after goals are achieved, projects completed, bankruptcy, and in other cases, a partner’s death.
To create a legally enforceable partnership agreement in Miami, Tampa, Orlando, Naples, Jacksonville, Tallahassee, Fort Lauderdale, or any other city in Florida, download our free partnership agreement form here, today.