Sample Texas Partnership Agreement
Clauses to Strengthen Your Partnership Agreement in Texas
A partnership agreement refers to a fundamental contractual document created between two or more parties getting into business with the intention of making a profit. The partners share in the profits and the losses of the business, and these partners could also be personally liable for the liabilities, and the obligations of the partnership (general partnership) or their personal liability could be limited (limited liability partnership). It, therefore, means that before you prepare your business’ partnership agreement, you will be required to agree on the business structure that would work well for you, or rather, one that would meet your needs in the best way.
Remember that the agreement is the critical and the foundational document that ensures the success of a newly set up business. Among other reasons, this document ensures that proper and clear communication and the definition of the roles and responsibilities of the partner. This document comes in handy in the documentation of your business’ contingency plan for when things go sideways in the future while ensuring the efficient running of the day to day operations of the business. However, this document cannot do all that on its own; you need to create an all-inclusive partnership contract that’s specific to the needs and the goals of your partnership business.
How to create a partnership agreement
Note that the partnership agreement is also called a partnership contract, a general partnership agreement or a business partnership agreement.
To enjoy the immense benefits brought about by the partnership agreement in Texas, the first thing you’d have to do is to download our free Texas partnership agreement form. While you have the option of hiring legal counsel, the lawyer may charge you more than you can afford. The legal partnership agreement sample form is an excellent place for you to start since it’s not only free, it’s also editable, and it has leading clauses to guide you as you prepare a legally binding document that represents your business’ needs. The clauses in the partnership agreement are designed to provide guidance in the daily operations of the business, and it also sweeps in later when there are contentious issues that call for your immediate attention. Therefore, when drafting the partnership contract, you need to make sure that all the critical factors of your business and its leadership/ organizational structure are covered.
So, what do you need to include in your partnership agreement?
Essential Clauses to Strengthen Your Business Partnership Contract
In addition to the legal business name of the partnership business, a description of the purpose of the partnership business, the partners’ information like their names/ addresses, and the term of the partnership, there are other clauses that you must incorporate in your business partnership contract. These clauses include:
The human memory is frail, and in most cases, unreliable. Therefore, it wouldn’t be a sound idea to expect the partners to remember every little or big contribution they ever made accurately. So, to ensure that you are all on the same page regarding your contributions, we recommend putting down all those details on paper. In your written agreement, specify the capital contributions made by each partner, whether the contributions are in the form of cash, property like buildings or equipment, intellectual property, or sweat contributions. In most cases, sweat contributions (time and effort used in logistics and other necessary tasks) are the most contentious of contributions in partnerships with some partners being unhappy with the share of the profits the other (non-capital contributing) partners receive. Therefore, to avoid cause for contention, you all need to sit down and find a middle ground and a way of valuing the contributions of the partners. Make sure that you are all on the same page before you sign off on the agreement.
Besides the capital contributions, the other important financial element to be specified is the one that deals with the distribution of profits and losses. You need an agreeable method of profit distribution. Also, measures on how to capital draws will be made should be outlined.
The agreement should include a clause that hammers clearly specifics on how each of the parties would handle different responsibilities, their obligations, as well as the limit to the authority of the partners. Basically, the contract must specify who’s responsible for what, who can do what, and which decisions can only be passed by which partners. For example, the managing partner might be responsible for the overall running of the partnership business, but he/she cannot terminate or bring a new partner on board without the consent of the other partners. This clause also covers voting procedures and voting rights.
Most partnerships have fallen apart, and millions have been lost as a result of disputes among partners and, in other cases, disputes with the partnership structure. But since you don’t want to be a statistic, you may want to institute procedures to be implemented to ensure the efficient resolution of all conflicts. Note that having a mediation clause saves you time and money otherwise spent on the courts.
A partner may want to have it all, but to ensure that you all serve common interests; you need to have measures that would stop partners from engaging in businesses that are directly in competition with the business of the partnership.
Finally, add a clause on exit strategies. This covers termination procedures, buyout, what to do in the event of a partner’s death/ incapacitation, and how to remove a partner, among other procedures.
The partnership contract is a document that protects the interests of your business. To create one today in Austin, San Antonio, Houston, El Paso, Dallas, Amarillo, or any other city in Texas, download our free partnership agreement here to get started.
TX Partnership Agreement
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