Things to Include in Your Partnership Agreement in North Carolina
Whether you are creating a general partnership, a limited partnership, or a limited liability partnership, you need to ensure that you have all the right systems in place. Besides choosing the best name for your partnership business, you also need to draft a legally binding document with the details of how you will run your partnership business. The legally binding agreement created between the parties to the partnerships bears a specific set of regulations regarding the rights, relationships, and the duties of all the partners. We are talking about the partnership agreement in North Carolina. This agreement is the legally binding document created to ensure the smooth running of a partnership business, while also limiting confusion among the partners (in terms of their roles and the expected responsibilities, plus the authority of each partner).
While you are not legally required to create a partnership agreement in the state of North Carolina, we recommend drafting and signing one. Thanks to this optional legal provision during the formation of your partnership business, you will have legal proof of the actual nature of the relationship between the parties to the partnership and also for the relationship. Keep in mind that in the event of the court’s involvement, a signed partnership agreement takes precedence over the courts. In a nutshell, the partnership agreement is the legal instrument that ensures the enforcement of your rules, just as you intended to. Remember that the partnership agreement is also known as the partnership contract, business partnership agreement, articles of partnership, and to others, a general partnership agreement.
That said, you don’t have to worry about where to get your partnership agreement documents done since you can create an agreement specific to your business needs, right at the comfort of your home or office by downloading our free North Carolina partnership agreement form. Our legal partnership agreement template is editable and downloadable, and the best part is that it features all the important sections that you must have in your partnership agreement. Therefore, you can move past the handshake agreements and formalize your partnership’s agreement at no extra cost.
So, what do you need incorporated in your partnership contract?
Important Elements of Partnership Agreements
A good business partnership agreement is the backbone of any successful business partnership, but its success is tied to the provisions and the specificity of the structures you set up. So, if you are going to create the best legal partnership contract for your business, you need to make sure that it has the following sections covered:
Specification of the financial contributions of the partners
Don’t rely on your memory when it comes to recording individual partner’s financial contributions. In your agreement, specify how much each partner is bringing into the partnership business. By writing down individual financial contributions, you will have proof in case of disagreements in the future. Recording each partner’s contributions is also crucial where some partners contribute more to the startup capital than others. You also need to specify the meaning/ value of ‘sweat equity’ contributions.
Division of roles
The agreement should specify the roles of each partner before you begin your business operations to prevent a situation where the partners step on each other’s toes. Don’t overlook anything – be specific about what each partner will do (based on the skillsets/ strengths), how each partner will fulfill their role, and also specify the partner’s decision-making responsibilities.
Clarify Handling of Income
The other clause you need in your partnership contract is the one that specifies what you regard as income. While you expect to make a good profit from the partnership, you also need to specify how each partner will be drawing income from the earned profits. So, if you agree that all the partners will draw on salaries, then you must also indicate exactly how much each partner earns and how often they will be allowed to draw from the profits pool. Don’t forget to include a clause that highlights the percentage of the profits to be plowed back into the business.
You also need to make sure that your partnership agreement specifies how different types of property will be handled. How is tangible (furniture, land, building) and intangible (intellectual property, goodwill, client lists, process designs, computer applications, etc.) property to be handled? And don’t forget to write down what each partner brings into the partnership.
On the same note, you also need to specify what the properties for the partnership could be used by each partner, and also whether it’s acceptable for partners to use the partnership’s property, or not.
Bank Accounts, Accounting, and Taxes
The contract should also feature a section on the setup of bank account and handling of tax-related matters. This section also includes the clause on how the signing of privileges will be done, whether the partnership business will use a line of credit or not, and if purchases can be made without the consent of the other partners.
We recommend incorporating a mediation clause in the partnership contract because sitting down to talk things over doesn’t always work. The mediation clause will guide you on when and how to call in a mediator or an arbitrator to resolve disputes.
The contract also needs to offer guidance on what will happen in the event of the death or the incapacitation of a partner, as well as the steps to be taken when a partner wishes to terminate their membership, buyout procedures, onboarding for new partners, and the handling of a partner’s interest in the partnership.
If you wish to set up your partnership business in Raleigh, Greensboro, Charlotte, Asheville, Durham, Wilmington, Fayetteville, or any other city in North Carolina, our free downloadable partnership agreement forms will get you started in the right direction.