Partnership Agreement in Montana And the Mistakes to Avoid When Forming a Business Partnership
A partnership agreement in Montana is one of the most overlooked legal documents between partners, and it’s the reason why some of the most forward-thinking business partnerships fall apart all too soon.
To put things into perspective, the business partnership agreement in Montana, also called the partnership contract or the general partnership agreement refers to the legal instrument that institutionalizes business partnerships by working as the guiding tenet or the constitution through which partnership businesses are run. This legally binding document stipulates the right, obligations, and relationships among the partners and between the partners and the partnership.
Working as a guiding light, the partnership agreement offers guidelines on important aspects of the partnership, including profit sharing, capital distribution, dispute resolution, partnership dissolution, partner termination, partner authority, partner salaries, and the governing partner.
Without a written and signed agreement between partners, a partnership business could come to its untimely end/ death because of squabbles among the partners. The agreement often prevents a situation where the court is forced to determine the fate of the partnership, and it also bears guidelines that ensure that continuity of the business should one partner exit the partnership or if their rights in the partnership are bought out.
To get you started down the right path, to save you time and costs, we recommend that you create a partnership agreement for your business. Ensure that all the parties to the partnership agree to the terms before the agreement is signed. Our free Montana partnership agreement form is curated with all the important clauses needed in the partnership contract, and your only job will be to add little tweaks to the clauses or to include provisions that will enhance the strength of the foundational structures of your partnerships. Note that our legal partnership agreement samples are intended to guide you, and you must add specifics that will turn the draft/ partnership contract template into a legally enforceable document. Your partnership agreement in Montana stipulates your agreement in creating one of the most successful business partnerships, and it also serves as the guiding light for the business at times of confusion and disagreements.
That said, here are some of the mistakes you should be wary of when forming a partnership business.
Mistakes to Avoid in Partnerships
Failing to create a written agreement
As mentioned above, a written business/ partnership agreement is one of the most important elements of any partnership, meaning that the absence of a partnership agreement could be the biggest mistake you ever make in a partnership. Remember that the agreement between business partners is the instrument that will clarify the parameters of the business partnership from income division to dispute resolution, partner authority, and possible changes in the structure of the partnership.
Lacking Clarity on The Long-Term Goals or Vision of the Business
Despite the excitement that comes with starting a new business, specifically with your friends or family, you must never overlook the potential of incompatibilities existing between you and the new partner(s).
To this end, you need to make sure that you all have the same vision for the partnership. Do you foresee the same kind of future for the partnership business? How do you intend to achieve the goals you have in mind? Sharing a common vision and being clear about how you will meet your business objectives is one of the biggest drivers for business success.
Therefore, before you get into a partnership, you need to make sure that you and your partner are on the same page when it comes to plans of action and handling of important business decisions.
Sharing a common vision also means determining the following in advance:
Business ownership and determining if you will have equal ownership and control over the business or not. And if not, who among the partners will have more control than the other(s).
You also need to establish the voting rights of each partner, and also agree on whether a small percentage of the partnership would go to a third partner/ third-party partner, specifically for purposes of tie-breaking, in case of disagreements.
Keep in mind that your business will only be successful if you are all in agreement over the most important elements of the partnership.
Settling for the Wrong Partnership Structure
You are in a partnership business if you agree to share in the ownership, as well as the profits and the losses of the business. However, this sharing strategy can take place in limited and general partnerships. If you are forming a partnership with one or two other people, we recommend forming a general partnership, unless your legal counsel recommends the limited partnership agreement as the best approach for you.
But keep in mind that the general partnerships are easier to set up compared to the limited partnerships since the former involves at least two active partners, and the partnership doesn’t involve any passive investors. General partners get to co-manage the business and assume ownership and responsibility for the profits, assets, debts, and even taxes. Limited partners, on the other hand, often serve as investors.
Not Having an Exit Strategy
You must agree on whether a partner gets to sell out their business interests or not, the valuation of each partner’s business interests, how/ when a partner gets paid should they choose to give up their business interests, and you must also put in place provisions for the course of action to be taken if one partner is incapacitated.
By specifying all these details in advance, you protect your business interests and ensure that your investment in the partnership is worthwhile.
Interested in creating a partnership agreement in Helena, Billings, Bozeman, Missoula, Kalispell, Butte, Whitefish, or any other city in Montana? Get started with our free partnership agreement form that’s editable, downloadable, and easy to use.