Sample Rhode Island Partnership Agreement
Biggest Partnership Killers and the Importance of the Partnership Agreement in Rhode Island
Is your partnership set out for success? How strong is the foundation of the partnership business you are working on?
While the rules that determine the running of a partnership business are not set on stone, the truth is that you always need specific rules to guide how your business will run, how you will deal with changes in the business, management of finances, and a playbook to specify the roles and the obligations of your partnership business. To help you do all that, you need to create a legally binding document that would ensure that you have the structures of your business set as you’d like to ensure the success of your partnership business from day one. Now we are not saying that your business will be a smooth-sailing ride from day one, but having a guidebook ensures that everything works smoothly. We are talking about the partnership agreement.
The partnership agreement refers to the legally binding agreement outlining the rules, roles, and responsibilities of the partners. While the state of Rhode Island doesn’t require partnerships to create the partnership agreement, we recommend creating one to ensure that protection of your business and personal interests. A Rhode Island partnership agreement would get you started in the right direction, and we’ll help you get started in the right direction with our partnership agreement form in Rhode Island. This document is also called a partnership contract, a business/ general partnership agreement, and it allows you to steer your business in the right direction. The legal partnership agreement sample comes with all the important clauses that you need to streamline the operations of your business.
Most importantly, however, is that this document could be the most important document you create if you are looking for a way to ensure the success of your partnership. Thanks to this document, you will get to say, ‘I did all I could’ in case your business fails.
That said, here are the biggest partnership killers and how you could avoid them.
Failing to prepare a partnership agreement
The partnership contract is a crucial document when it comes to partnership businesses, because it not only specifies the capital contributions of the partners, it also outlines the percentage of the profits and the losses allocated to each partner. The other benefits of the partnership contract include guidance on dispute resolution, as well as partnership business’ management, and the authority of the partners.
Lack of Clarity on the Partners’ Roles
The other reason why most partnerships fail is the absence of clarity regarding the roles of each partner. This also ties to the partnership agreement, which should have a section outlining the roles of all the partners, as well as the authority carried by each partner. For example, when it comes to the managing partner, their roles in the day to day operations of the business, as well as their level of control with regards to the partnership. Absence of a clause clarifying the roles of the partners and also their authority would put the partnership in jeopardy, and since you don’t want that from happening, then you must all sit down with the other partners and ensure that the roles of the partners are specified. Essentially, you need to determine whether you will have a 50/50, 60/40, or 70/30 split of your responsibilities.
Not having an exit strategy
As you already know, there is a lot that would go wrong in your business, but one of the bigger mistakes would be failing to define an exit strategy. You don’t go into a partnership, hoping that things will end, but everything comes to an end eventually. To ensure that your partnership business runs well and comes to an end without any troubles, you may want to incorporate an all-inclusive exit strategy. Some of the things you would want to incorporate in your exit strategy include conflict resolution and how to handle disagreements, how to ensure that an exiting partner doesn’t affect the continuity of the business, buyout procedures, as well as the percentage of the initial (and additional) capital contributions that the exiting partner would be allowed to take home when leaving.
Partnering with the wrong person(s)
At the end of the day, you need to make sure that you are entering a partnership business with the right people. What this means is that if you are getting someone to be part of your partnership business because of their unique skills, it will be a good option if you hire them as employees instead of asking them to partner up for the wrong reasons.
The right partners share in your values and mission, both in the short-term and in the long-term. For the success of your partnership, you might want to ensure that everyone getting into the business is in for the right reasons.
To get started with your partnership agreement in Warwick, Newport, Providence, Cranston, Pawtucket, Woonsocket, or any other city in Rhode Island, download our partnership agreement form here today.
RI Partnership Agreement
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