Partnership Agreement in Iowa
Without a partnership agreement, you and your partners will be unable to deal with disputes should they arise, and this could mean that minor misunderstandings easily turn into uncontrollable disputes threatening the business partnership’s future. Besides the threat to your business partnership, the absence of the partnership contract would also mean that most aspects of the business would be under the control of the state.
Understanding partnership agreements
In Iowa, a partnership agreement refers to the legally binding written agreement that governs the operations of a business partnership, as well as the conduct of the partners, their roles, rights, relationships, and responsibilities. This legal contract is also called a business partnership agreement, a general partnership agreement, or a partnership contract.
The primary role of this agreement is that it provides for the structuring of your partnership, as well as the relationships among partners in a manner that best suits your business.
The benefits of this agreement include:
- It prevents the enforcement of the default state rules applicable to partnerships
- It specifies who owns the business
- All partners get to agree on all the important matters regarding the partnership in advance
- It guides the partnership when removing a non-performing or a disruptive partner
- The agreement protects the business, as well as the investment of the partners.
- It offers protection to the minority owners of the business partnership
- It also protects the majority owners, while clarifying the blurred lines
How to Create a Partnership Agreement
Even though a partnership contract is not a mandatory business partnership document, its creation protects the partnership and the partners by setting out the governing rules and obligations of all the parties involved.
Therefore, if you are planning to form a business partnership in the next few months with your sibling, spouse, or acquaintance, the partnership contract will be a great place for you to start. We’ll help you fast-track the process with our free Iowa partnership agreement. This sample partnership agreement is editable, downloadable, and printable. Also, its enforcement is not subject to notarization. So, all you need to do is to make the necessary provisions for your partnership, adapt them for your partnership, then sign it once you are satisfied with its contents.
Elements of the partnership contract
Even though our legal partnership agreement template has the relevant sections you need to get started, you need to specify it’s the sections of the partnership. Here are the specific sections that you must include in the partnership agreement in Iowa.
Name of your business partnership
Your first contractual obligation in the partnership is to agree on the name of the business partnership. Once you’ve settled on the name, confirm the availability of the name with the registrar’s office. You can only register your business name with the Secretary of state after it’s cleared and confirmed to be available.
Here, you also need to confirm the type of partnership structure your business will run as, then add the relevant abbreviation at the end of the name. For example, a limited partnership would be designated LP or LLP.
This section of the agreement stipulates the contributions of the partner in the form of cash and capital, property, as well as professional services. All these contributions are to be made before the start of the business operations.
Besides the contributions, you should also outline ownership matters, specifically the ownership stake each partner is entitled to, given their contributions.
Distribution and the allocation of profits, losses or draws
Here, you all need to agree on the percentage or the profit-sharing ratios to be allocated to each partner.
While most partners agree to share the profits and losses based on individual partner capital contributions, others settle on an equitable approach to profit sharing.
Besides the sharing of the profits and losses, the steps for the recovery of losses should be outlined, as should the drawing of the profits. In this case, you need to provide for the terms for drawing the allocated profits from the business – will the partners be entitled to regular draws, or will the profits be distributed once and all at once to each partner at the end of the year.
Since you will have different financial needs from those of your partners, you shouldn’t overlook this section. Also, everyone should be on board with the decision to settle on.
In this section, it should be agreed that no partner can undertake binding obligations on behalf of the partnership or the partners without the approval of the other partners. This section also sets out the limitations of the partner’s authority.
Voting and Decision making
This section stipulates the voting rights of each partner, as well as the decisions that have to put to the vote to pass.
The managing partner is named here, with all the management details and responsibilities specified.
If new partners are to be admitted in the future, the terms and procedures for new partners must be specified.
A mediation clause would be added to this section to help resolve disputes between and among partners.
Death or withdrawal of a partner
The contract should also state the procedures that should be initiated when a partner dies or withdraws their partnership.
Dissolution of the partnership
The factors that would necessitate the dissolution of the partnership will be captured here; the winding-up procedures too.
If you’d like to prepare your partnership agreement in Davenport, Des Moines, Ames, Cedar Rapids, Iowa City, Dubuque, Sioux City, or any other city in Iowa, our free partnership agreement form will get you started easily.