What’s in a Partnership Agreement in Georgia?
Setting up a limited partnership in the state of Georgia is rather simple, as long as you adhere to the state regulations regarding the creation of partnerships. Having settled on the type of partnership your business will be, you need to register the partnership then file all the other necessary documentation.
One of the documents that’s not listed as a mandatory partnership registration document, however, is the partnership agreement. According to the state, this is not a mandatory document, and you don’t have to file it with the Secretary of state. However, we recommend preparing this document and having all the partners sign it. Why? In the face of adversity and disputes, this document will guide the partnership forward and generally offer resolute guidance on what should be done next. Think of this as the document holding the tenets of your partnership.
About the Partnership Agreement in Georgia
A partnership agreement is synonymous with the business partnership agreement, the partnership contract, and the general partnership agreement. It represents the contractual agreement between two or more parties (could be organizations or individuals) who’ve agreed to enter into business together and to share in the profits/ losses of the business.
This document is legally binding as long as it’s signed, and its enforcement is not dependent on its notarization.
Benefits of a partnership agreement
- Among other benefits, the primary reason why you should get a partnership contract, even when the partnership is between you and your family or close friends, is because this document lays out the rules that govern the partnership.
- It stipulates the course of action you should take to prevent escalation of minor problems, as well as the management of major issues that would otherwise call for the involvement of the courts.
- At the same time, this contract gives the partners a firm understanding of their roles, responsibilities, and relationship (among members and between members and the partnership).
- This agreement is essential as it overrides any default state laws, especially the ones on profit-sharing.
- Lastly, the best part about having this contract is that you don’t have to spend money on the legal process involved in its creation. Using our free Georgia partnership agreement form template, which is downloadable, editable, and printable, you can create a fully enforceable legal partnership agreement in a short time. The free partnership agreement template has specific and important sections that allow you to create a comprehensive contract binding you and the other partners to the partnership.
Things You Must Address in Your Partnership Contract
1. Name and Purpose of Partnership
In addition to settling on the type of partnership that works for you, you need to put down the name of your partnership (confirm the availability of the name first) and the reason for its formation. The partnership agreement in Georgia makes this possible.
This section may also include the term/ duration of the partnership.
2. Partner Contributions and the Allocation of Profits and Losses
How much is each partner putting into the partnership, in terms of cash, capital, and time contributions?
Profits/ Losses – How do you allocate your profits and losses? How is the allocation of profits/ losses done? Is the allocation based on individual capital share contributions, or do all partners get an equal profit/loss share?
Draws – How are capital draws decided, and do partners get to take out regular capital draws from their allocated profits from the partnership? Are partners allowed to withdraw their allocated profits in entirety?
3. Partner Authority and Voting
This section of the partnership contract ensures that no one partner makes a binding decision on behalf of the partnership or the other partners, without the knowledge and the approval of the other partners. Thanks to this clause, a partner will not incur a debt for the partnership without the direct nod from the rest.
In addition to governing what a partner may or may not do, the agreements for partnerships will also stipulate the conditions and authority on business decision making. Here, the limitations of a partner are outlined.
Voting also comes in here – to effectuate big-picture decisions, the contract may require that the partners vote to pass or decline something. Some of the decisions will require a unanimous vote, while other decisions will pass with a majority or a minority vote.
To avoid conflict, the contract should also stipulate the voting rights allocated to each partner and the method used to determine the voting rights allocated to each partner.
The managing partner is responsible for the day-to-day running of the partnership business operations. Therefore, the partnership contract is also expected to name the managing partner for the partnership, and whether the managing partner is a named partner or an independent (professional) manager.
5. New Partners
Is the partnership open to new partners in the future? If yes, what’s the process of bringing in the new partners?
6. Death and Withdrawal of Partners
Which are the steps to be taken upon the death or the withdrawal of a partner? Should the partnership outlive its partners? Which buyout agreements are put in place to protect the partnership?
7. Dispute Resolution
If you spell out the steps for dealing with dead-locked disputes at your partnership’s onset, you could end up saving a lot of money. One of the best dispute resolution strategies involves the incorporation of a mediation clause to compel the partners to work with a mediator or an arbitrator to resolve conflict.
Ready to constitute a partnership agreement in Atlanta, Macon, Savannah, Augusta, Athens, Alpharetta, or any other city in Georgia? Get our free and downloadable partnership agreement form here today.