The Significance of Preparing and Signing a Partnership Agreement in Minnesota
Did you know that some of the biggest corporations we are all in awe of today started off as partnerships? We are talking about Google, Apple, Hewlett Packard, Warner Brothers, McDonald's, etc. And though we won’t go into the specifics and the stories that have molded these corporations, one thing is clear – these partnership businesses were built on very strong foundations. Essentially, at the core of any successful business partnership, there exists a set of rules that guide the operations of the business. These rule books outline the roles, responsibilities/ obligations, and the relationships of the parties to the partnership. Without these structures, business partnerships would have crumbled and died before the realization of the objectives of the partnership.
All that brings us to the most important document where structuring of partnerships is involved – the partnership agreement. You may think that determining the partnership structure for your partnership is enough, but it isn’t. You need a playbook, your true North, the compass that will protect the partnership, ensuring that you achieve the objectives you set out and resolve disputes easily and professionally, with the guidance of the signed agreement.
While the state of Minnesota hasn’t made it a statutory requirement for partnership businesses to create and notarize partnership agreements, we strongly recommend that you have this document in place before you move forward. A partnership agreement, also a partnership contract, a business, or a general partnership agreement, carries the tenets/ guiding principles that protect your business from issues like stress, money, ego, monthly overheads/ daily expenses, as well as human resources issues.
To help you get started the right way, we offer professionally created free Minnesota partnership agreement forms. Our legal partnership agreement samples have all the important sections of the partnership agreement, and they are designed to ensure that your contract is enforceable, legally-binding, and professionally done to get you out of a pickle should you get yourselves in one in the future. Some of the sections of this sample partnership agreement in Minnesota include capital contributions, distribution of profits and losses, dispute resolution, partner authority, partner engagements and the need for non-compete agreements, dissolution of the partnership, and partner termination among other sections
Besides the obvious – a partnership contract lays out the structures to be followed, and it ensures proper resolution of conflicts, the agreement also offers guidance in many cases, and it prevents conjecture and misconceptions. The contract is also effective in enhancing the safety and the future of the partnership.
Here are the other benefits of the business partnership contract
It clarifies how expenses and capital are shared
Often, partners share capital, and for the longest time, this has been deemed the standard in partnerships. However, it isn’t how things should be done. In addition to sharing capital, you also need to determine the best ways of sharing expenses. Without specifications on the sharing of expenses, you end up giving up your enterprise-ability, each time you share your resources, money, property, or information.
The reason for this is that we live in an imperfect world, and that means that your partners might not be full of integrity or as upright as you wish them to be, and they could take everything you share and run with them as their own. With this in mind, create a partnership agreement with an associated arrangement incorporated. This arrangement allows you to work out the nitty-gritty on the sharing of expenses. Also, you will find it easier to walk away when the need arises or if things no longer work for you.
You will partner with the right people
In most cases, you end up in a partnership business with friends and family who may or may not agree with you on the toughest of business decisions. In other cases, you may have been approached and asked to be part of the partnership just because you have a certain set of skills that the other partner(s) know they need for the success of the business – in such cases you may end up working in an unhealthy way and against each other, breaking apart the partnership. So, even when you get into a partnership agreement knowing that you will be sharing in the business profits, losses, expenses and duties, you need to make sure that these items are specified in writing. But most importantly, make sure that the terms are favorable to you. It’s better for you to walk away now rather than later, and on bitter, irreconcilable terms.
It’s a critical component of limited partnerships
Having a partnership agreement is great, but you need to make sure that the agreement specifies the liability of every partner. In this case, we recommend the establishment of an agreement around a limited partnership. With this kind of partnership, a named limited partner will not be liable for the obligations or the actions of the general partners. To ensure that these terms are acceptable and agreed upon by all partners ahead of time, include these details in the agreement, then make sure that every partner understands their liability obligations.
It lays out exit strategies
Never finalize your partnership contract if you haven’t included provisions for exit strategies, Like prenups, in marriages, the exit strategy for the agreement will define the terms of exit, and it also provides for the options available to the partners regarding buyouts.
Ready to create a binding, favorable, fair, and a concise partnership agreement in Minnesota? Get our free partnership agreement forms downloadable from all cities in the state of Minnesota, from Duluth and Minneapolis to Saint Paul, St. Cloud, Eagan, Bloomington, Eden Prairie, and Mankato.