Free New York Partnership Agreement

Partnership Agreement in New York: Essential Elements

If you are interested in creating a partnership business in New York, you need to make sure that you start everything the right way. Your partnership business needs a strong foundation, and this will be the case for you, only if you institute written systems that help you maneuver all the aspects of your business. Remember that even with the biggest goals and shared values/ vision, the one thing that determines the eventual success of your partnership business is formed around your systems. The partnership agreement and the parties to the partnership are two of the most important systems in business partnerships. These are the elements that make the business work, which is why you must establish the strongest systems to achieve your goals.

A partnership agreement is defined as the legally binding legal instrument between two or more parties to a partnership. This agreement stipulates the rights, rules, roles, and responsibilities intended to bind the business together. The partnership agreement is also called a partnership contract, a legal partnership agreement, a business partnership agreement, or a general partnership contract.

Now, while the statutes do not list the partnership agreement as one of the important documents that you must have when forming a partnership, we highly recommend this agreement since it’s the document that could make or break your partnership business. That said, you don’t have to spend a lot of money to create or have a legally binding agreement for your partnership. Thanks to partnership agreement templates, you can create an enforceable partnership agreement at no extra cost, thanks to partnership agreement templates.

Our free New York partnership agreement will guide you through creating an airtight partnership agreement. The created agreement will form the basis for your decision making since it comes with sections and clauses addressing different important parts of your partnership business. Remember that the partnership agreement in New York is the one document that would protect your partnership from falling in case of small disagreements.

But knowing that you need a partnership agreement is not enough; you also need to make sure that you know what you need to be present in the agreement to make it really airtight, or rather, to make sure that your partnership has a strong foundation.

That said, here are the important sections that must be in your partnership contract.

Extent of Liability

Here, some of the things to be addressed include:

    • Partner actions – is there a limitation on the liability of the general and limited partners? What’s the liability of the partners if one partner engages in illegal activities while representing the partnership business?

    • Authority – How is the structure for decision making and partners’ authority like? Is decision making based on the partner’s ownership share or consensus? How will you avoid deadlocks in decision making? How much control does the managing partner get? What is the exact level of authority needed for a partner to act on behalf of the company, and without a unanimous vote?

    • Borrowing/ Spending – Which procedures are to be followed for partners borrowing money using the business’ name? Can a partner borrow money on behalf of the business without the approval of all the other partners?

    • Debt/ Liability matters – will a partner’s insolvency or bankruptcy affect their membership? How is debt repaid? How are the partners protected from the debts of the partnership?

Ownership and Compensation

Here, the partnership contract addresses:

    • How the percentage of ownership will be determined

    • The percentage of the profits to be reinvested to the business

    • How the salaries and capital draws will be determined, against the profits

    • Assignment of perks

    • Whether there are limitations to the engagement of side businesses by the partners, or not and how a conflict of interest will be resolved.

    • Distribution of profits, tax distributions, and work absence matters.

Termination/ Sell/ Buyout

    • What happens when an investor exits the business? How are third parties brought into the business? How are the interests of an exiting partner handled? Do partners need to sign non-competes?

    • Which are the steps for firing an incompetent partner or a partner that engages in malicious behavior?

    • Is buyout an option, and if yes, which are the steps to be followed?

    • This section of the partnership also addresses steps to be taken in the event of a partner’s death, IP rights, division of shared assets, conversion into a different business structure, for example, an LLC.

    • Liquidation steps and asset division.

    • Handling changes in control and how to avoid deadlock

Dispute resolution

When is mediation necessary? Which are the preferred alternative methods of dispute resolution? Arbitration or mediation, and the selection process for the mediator or arbitrator.

Management/ Governance

This section of the partnership covers overall management of the partnership, decision-making, communication, operations, book-keeping, approval rights, and the management structure of the partnership.

By using a partnership agreement that specifies all the elements above, your partnership business will have a higher chance of success. If you find yourselves at an impasse, the agreement will offer guidance on the most appropriate steps to be taken to salvage the partnership and personal relationships. With all that you can do with a partnership agreement, we strongly recommend all business partnerships to create have this legal system in place.

To create an airtight partnership agreement in Buffalo, New York, Albany, Rochester, Yonkers, Syracuse, Niagara Falls, or any other city in New York, download our free partnership agreement form to start the process.