Free Michigan Partnership Agreement

The Benefits of a Partnership Agreement in Michigan

Here’s a tough truth you may not be ready to hear: partnerships like marriages are tough, and in both cases, the statistics show that half of marriages (and partnerships) never survive. In both cases, factors like money, stress, control and management issues, ego, overheads, and other daily expenses easily get the partners’ nerves, and with all that stress, things are highly likely to collapse.

The good news, however, is that you can avoid all that stress by writing, agreeing to, and signing a partnership agreement in Michigan. Since we’ve brought up marriages, it’s only fair to bring up the fact that your partnership agreement is more or less the same as a prenup in a marriage. It might not sound like the same thing, but when money and contracts are involved, they are, and such documents must be signed. So, while the statutes don’t require you to create a business partnership agreement, we highly recommend that you slow down the business partnership formation steps until you have your hands on a legally enforceable partnership agreement.

Also, while you are seeking legal counsel on the best kind of partnership structure for you, you need to remember to ask your counselor for their thoughts on the drafted partnership agreement. While our free Michigan partnership agreement forms offer the much-needed direction as to how to create a legally binding agreement, our partnership agreement sample will not have the specifics for capital contributions, profit/loss distribution, allowances, time/ involvement, etc. Therefore, it is in your best interest to verify the details of the agreement, but even more importantly, you shouldn’t ever overlook the powers of a partnership contract in Michigan.

Here are the benefits that come from preparing a partnership contract

    • 1. It lowers the effects of disputes

      In the event of a dispute, whether internal or external, the partnership agreement will offer guidance and also the evidence you need to effect some rules or directions. This is because this signed written agreement eliminates all assumptions or conjecture, and it also provides proof. Some of the things that the agreement can prove or help resolve include:

        • Distribution of profits and losses

        • The intention of the named parties to actually form a partnership business

        • The term/ expected duration of the partnership and the circumstances that would result in the dissolution or continuity of the partnerships

        • Handling matters regarding joint asset and liability ownership

        • Best dispute resolution methods/ approaches to be taken

      With an agreement evidencing all these (and more), the partnership and the partners will be saved from unnecessary and costly legal disputes.

    • 2. It prevents unnecessary partnership dissolutions

      At law, a partnership could be dissolved if:

        • 1) A partner dies

        • 2) The main partner becomes bankrupt or insolvent

        • 3) The partnership’s term expires

        • 4) At least one partner can no longer own or represent the partnership legally

        • 5) One partner provides notice outlining their intentions of dissolving the partnership

        • 6) It’s unlawful for the partnership to be running with some named partners/ members still involved

        • 7) One partner makes a court application, and the court approves its application to have the partnership dissolved.

      Note, however, that a partnership contract doesn’t automatically dissolve the partnership automatically under the first 4 causes above, but causes 5-7 would result in the dissolution of the partnership, with or without the agreement. With this in mind, you could use a Michigan partnership agreement to control the impact of these events by making your own rules and regulation regarding the circumstances that would warrant the dissolution of the partnership. For example, the involvement of the courts isn’t always necessary, but a partnership agreement is the only document that could prevent the court’s involvement.

    • 3. It proves flexibility in the salaries of the partners

      A managing partner, for instance, takes an active role in the day-to-day running and management of the partnership business. If their capital contribution is equal to that of the other partners, it would be unfair if they didn’t earn a salary at the end of each month. So, to ensure that the partners entitled to salaries get paid and that the other partners don’t raise eyebrows over non-payment or a smaller payment ratio, you must outline the terms for salaries and the amount entitled, in the partnership agreement.

    • 4. Partnership Reconstitution

      What happens when you wish to exit a partnership without affecting the continuity of the partnership or making it impossible for new people to join? How will you take over your assets/ liabilities, and how will the other partners handle the remaining share of the assets/ liability? And while at it, which percentage of your initial capital are you allowed to take out and when?

How do new partners come into the reconstitution? Remember that in a reconstitution, at least one of the continuing members was a member before the reconstitution, and there is a clause on reconstitution in the agreement. Also, the assets are to remain unchanged (largely), nature/ customer or client-base, and the name of the business doesn’t change during reconstitution. Make sure these things are covered in the agreement.

If you are interested in creating a partnership agreement in Detroit, Lansing, Ann Arbor, Grand Rapids, Flint, Novi, Saginaw, or any other city in Michigan, download our free partnership agreement form today to get started and to enjoy all the benefits above in future.