Reasons for Creating a Partnership Agreement in Maine
Written frameworks and guidelines ensure that rules and regulations that govern the operations of a business are adhered to, encouraging the success of the business establishment. Many businesses, especially partnerships that have not had a good run, often blame the weak foundations on which the business was set up. So, for you to ensure that the partnership business you are starting is successful, you need to ensure that you start things off right from the get-go.
One of the best strategies you could employ, one that the other partners will be on board with, involves the creation of a partnership agreement, also called a partnership contract, a business partnership agreement, articles of partnership, or a general partnership agreement.
This partnership agreement stipulates the roles, rules, responsibilities, and the relationships of the business partners to the partnership and to each other. This agreement, though not mandatory as per the state laws, is essential in many ways (to be looked at below), but most importantly, it ensures that the goals of the partnership are met. It also allows for easy navigation of different business affairs, while enhancing the proficiency with which misunderstandings are cleared up.
To enjoy these benefits of the partnership agreement in Maine, first, download a copy of our free Maine partnership agreement form. This legal partnership agreement template is customizable easily, printable, and downloadable, which means that each partner gets their copy after signing the original. The other advantage of this contract is that it doesn’t have to be notarized to be enforceable.
Note, however, that having a sample partnership agreement is not enough; you need to know about all the relevant information that goes into the document. These are the sections with different provisions governing the partnership.
Key Elements of the Partnership Contract
The name of the business partnership
The purpose or the goal(s) of the partnership
Term/ duration of the partnership
Partner contributions to the partnership in terms of cash, services, capital, future contributions, and property (real and intellectual) contributions
Ownership interests of the partners – these interests would be based on the asset contributions of the partners
Effects of new partners on each partner’s ownership interests
Distribution of profits and losses and the method of distribution
Steps for recovery of losses
Appointment of the managing partner and their duties
Partners’ authority and the limitation of the authority
Salaries, vacation time, sick leaves, and the work hours of all the partners
Involvement of the partners in the activities of the partnership, non-competes, and confidentiality agreements
Dispute resolution – mediation and arbitration services
Procedures for withdrawal of a partners
Rules governing partner buyout
Steps initiated following the death of a partner
Procedures, terms, and conditions for admitting new partners
The conditions leading to the termination of the partnership
Winding-up procedures for the partnership
Reasons Why You Must Have this Agreement in a Partnership
1. Avoidance of the blanket state laws
Without a partnership contract specific to your partnership, the involvement of the courts and the state means that the resolution of the conflict will be made following the provisions of the state regarding the operations of the type of partnership you formed. Blanket laws applicable to general or limited partnerships would apply to your partnership. Therefore, to prevent this from happening, a written partnership agreement specific to your business is crucial.
2. Control and Ownership of the business
Control over the ownership of a partnership protects the partners and the business from falling into the wrong hands, in this case, the competitors. But the catch is that this level of control is only possible where there are specific regulations to guide to operations of the company.
A written agreement would, in such cases, restrict the sales or the transfer of ownership interests in the company, ensuring that a partner selling out their interests doesn’t sell those interests to just anyone, including the competition. The contract would, therefore, specify that partners interested in selling out their interests can only sell their interest to existing partners or third parties vetted and verified by the other partners.
3. Legal removal of a non-performing or a disruptive partner
To avoid getting sued by a partner for removal or termination from the partnership, a partnership contract should feature provisions governing the steps to be taken to remove a partner for disruption or non-performance. To make this clause, airtight, disruptiveness, and non-performance must be defined.
4. Protection of the partners' investment and the protection of the business
The written contract should have a provision to address the measures to be put in place and the steps to be followed to protect the business if one of the principal partners dies, goes bankrupt, or is disabled. Failure to specify steps could result in the slow death of the company.
Lastly, you need a business partnership contract to protect the majority and minority partners.
Whether you are in Lewiston, Bangor, Portland, Waterville, Augusta, Biddeford, Bar Harbor, or South Portland, or any other city in Maine, download our free partnership agreement form here, to protect your partnership today.