Sample Pennsylvania Partnership Agreement
The Basics of the Partnership Agreement in Pennsylvania
Before you begin your business operations, we suggest that you and all the other partners prepare and sign a partnership agreement that would specify the rights of the partners, as well as their responsibilities to each other and the partnership. This agreement is also designed to specify the services offered by the partnership business, the term and the duration of the partnership. In this article, we’ll look at all the important elements of the partnership agreement.
Before we delve deep into the agreement’s elements, it’s important to note that the process of drafting an enforceable legally binding agreement is not as complex as you’d think. We’ve made the drafting of the agreement as simple as possible with our free Pennsylvania partnership agreement form. This form has all the important clauses specified in the form, and though all the important sections of the agreement are already outlined, you will like how easy it is to tweak and edit all the important parts to ensure that the agreement best represents/ mirrors your business (structure/ needs/ and goals. Thanks to the Pennsylvania partnership agreement, also called the partnership contract, business partnership agreement, general partnership agreement, you get to protect the interests of your partnership business, as well as the interests of the partners.
Some of the benefits of the partnership contract include:
- The agreement made by partners protects the business from the courts taking action on behalf of the partnership
- It outlines the roles and the obligations of the partners
- The agreement guides on dispute resolution
The basics of the partnership agreement
Here are some of the most important elements of any partnership agreement.
The primary role of the partnership agreement in Pennsylvania is highlighting the percentage of the partnership business owned by each partner. The contract keeps a record of partner contributions before the business opens/ starts out. Having the contributions of each partner specified in writing is superior and more reliable than people because human memories are unreliable, and you cannot count on them all the time. The contributions of the partners are often used to calculate the basic ownership percentage of each partner.
Regarding the ownership percentages, the other important aspect defined by the agreement has to do with capital (cash/ property) contributions versus the non-cash contributions (sweat equity) made by partners. The agreement allows specification of the ownership percentages, and in the case of sweat equity, it specifies the value of each partner’s contributions. So, if you decide that the partners who give in cash/ property contributions, as well as sweat contributions earn a bigger ownership chunk in the business, then you won’t have to struggle with it later because it will be laid out in the contract.
The other essential part of this contract is the clause specifying the terms for the allocation/ distribution of profits and losses. At the end of the day, you need to record how much each partner contributes to the business. This section ties back to the ownership section, and they are both just as important. In most cases, the partnership contributions determine the percentage of profits and losses that each partner gets. Besides highlighting the percentages, this section of the partnership agreement also lays down the ground rules regarding the terms for withdrawal of profits, and also how much one would withdraw at a time.
This section of the partnership agreement outlines the authority of the partners. For example, who among the partners can get into legally binding contracts on behalf of the partners and the partnership. Thanks to this section of the partnership, you will be able to specify the kind of transactions that a partner can get into on behalf of the other partners. Thanks to the incorporation of this section, you will cut down some big risks by ensuring that partners do not get into debt and jeopardize your business’ financial risk. This section also guides on important business decisions.
This section of the partnership agreement is essential in that it ensures that disputes are resolved amicably, professionally, and without the involvement of the courts. We recommend adding a mediation clause in the agreement to ensure that you layout the right procedures you’d like to follow to ensure the proper resolution of conflicts and disputes. To ensure that your business partnership doesn’t fall apart following a small dispute, saving the partnership business time and money, you may want to ensure that you incorporate a dispute resolution clause into your partnership.
Exit Strategies: Death of Partner or Dissolution of the Partnership
What happens to the partnership business when a partner dies or if they are incapacitated? What if a partner wishes to exit the partnerships, what happens to the rest of the partners and the business? Does the partner forfeit a percentage of their stake in the partnership? Is it possible to buy out a partner? When are exiting partners paid, and how? At the end of the day, the partnership agreement should outline the procedures that will be followed by the partners in the event of a partnership and also how to ensure the proper transition of the partnership business should anything happen to the partnership.
If you are interested in starting a partnership business today in Pittsburgh, Philadelphia, Erie, Harrisburg, Scranton, Allentown, Lancaster, or any other city in Pennsylvania, we’ll help you get started with our partnership agreement forms.
PA Partnership Agreement
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