Free New Jersey Partnership Agreement

Top Reasons Why You Must Sign a Partnership Agreement in New Jersey

Some of the biggest corporations we are in awe of today started as partnerships. As you can imagine, the individuals behind these corporations put in the time, money, and everything else they had to actualize their dreams. Asked, these individuals would tell you that their biggest driving force was the shared goals and the visions for the business. And if they lost some of the people they started with, it’s quite likely that the survival of the business fueled by the dedication of the partners who remained. But beyond the vision, dedication shared goals, and values, you’d find that these successful partnerships got to where they are thanks to strong structures. These structures are the foundations of their businesses, and all the parties to the partnerships had to agree to stick to the stipulations of the written structures.

In case you are wondering, the structures we are talking about refer to the rules and regulations outlined in legally binding partnership agreements. The partnership agreements, also called partnership contracts, business partnership agreements, or general business partnership agreements, represent the written agreements between partners.

While the sense of camaraderie you feel towards each other before you get knee-deep into the partnership is important, when egos, stress, money, and control issues come up, that natural bond that you had could break. So, to ensure that you stick with it even on the bad weeks, months, or years, you need to prepare and sign a partnership agreement in New Jersey. Using our free New Jersey partnership agreement form, you will be able to layout different provisions for the essential sections of your partnership agreement.

Note, however, that the partnership agreement is specific to partnerships (all kinds), and it’s different from the shareholder agreement used by corporations.

While partnership agreements are not required as per the New Jersey laws, these agreements are crucial, and we recommend using/ creating one if you want yours to be one of the most successful partnership businesses.

The agreement will stipulate important elements of your partnership, such as:

    • The ownership percentage for each partner

    • Salary/ compensation to be paid to every partner

    • The business structure of the business partnership, specifically the applicable tax structures

    • Profit/ income/ and loss sharing

    • The right to sell partnership interests or shares

    • Buyout procedures and the steps to be initiated in the event of a partner’s death or their incapacitation.

    • Dispute resolution

    • Steps and requirements for additional capital requirements

    • Exit strategies

In a nutshell, the partnership contract is the backbone for a successful partnership since it lays the groundwork for the steps you’ll need to take to create and run a business that lasts to meet its goals.

The Essence of Written Partnership agreements in New Jersey

    • 1. Clarity on the roles, obligations, and responsibilities of every partner

      The agreement also offers detailed descriptions of how important partnership decisions will be made. For example, the agreement specifies/ names the managing partner, their roles, responsibilities, and how the roles of the named partners change.

    • 2. Clarification of Tax matters

      The agreements for partnerships prevent partnerships from tax issues because the agreement allows the partners to spell out the tax status of their partnership business. At the same time, the agreement shows how the profits of the partnership will be distributed while making sure that the distribution is based on acceptable accounting and tax practices.

    • 3. Avoidance of liability and legal issues

      Thanks to the partnership agreement, the liability/ extent of liability of each partner – general or limited, is defined, meaning that the liability issues are avoided in the long-run. For example, a limited partner is not liable to the debt/ liability of the partnership business, but the general partner may be liable for some or all the debts/ liabilities. This separation of liability matters ensures that you don’t have to deal with avoidable legal liability issues.

    • 4. Better dealing with change

      The other reason why you need a partnership contract has to do with the fact that the agreement outlines how the partners/ partnership deals with changes such as the exit of a partner, incompetence or incapacitation of a partner, divorce, or death. Buy-out procedures and onboarding steps for new partners are also covered in the contract.

    • 5. Dispute resolution steps

      The inclusion of a mediation clause in the agreement ensures professional and easy resolution of disputes that could otherwise affect the overall performance of the partnership business. This section may also include non-compete and non-solicitation agreements.

    • 6. The partnership contracts override state laws

      The other big reason why you need a partnership agreement is that this agreement between partner will override the state laws, as long as the language used in the agreement is acceptable by the state laws. So, you need to make sure that you have a written partnership agreement.

If you are interested in creating your partnership agreement in Jersey City, Newark, Trenton, Princeton, Paterson, Atlantic City, Clifton, or any other city in New Jersey, download our free partnership agreement form here, to get started.