Sample Virginia Partnership Agreement
How to Use the Partnership Agreement in Virginia to Make Your Partnership Work
Business partnerships, like personal partnerships, must be pegged on the strongest foundations to last and weather through challenges. While these partnerships are often steered by friendship, common goals, and affection, these are not the only important ingredients when it comes to running a successful business. And to break down your beliefs further, verbal agreements are not enough. For the success of your business, you need to write down the terms for that partnership, layout expectations as roles and obligations, and you also need to specify the rules to govern the partnership. In the partnership business setting, you need a partnership agreement, which is the equivalent of the marriage prenup/ postnup.
Today, we look at the business partnership agreement and how you could use the document to protect your interests and ensure the success of your business. This agreement is also called a partnership contract, general/ business partnership agreement, and it becomes legally enforceable, as soon as it is signed by the parties to the partnership – no notarization required.
While the state of Virginia doesn’t require partnership businesses to draft and file partnership agreements with the Secretary of State, this document is vital to the success of the partnership. With all the nasty breakups we’ve witnessed over the years, partnerships that were formed by the best of friends and even family, you need to protect your business from falling down that path. The partnership contract prevents that from happening, and the best part is that it does that in more than one way. We’ll look at your options below, but to make sure that you start off on the right foot, we recommend downloading our free Virginia partnership agreement form here. This agreement template has all the important sections that you need to customize to ensure the success of your business.
So, how do you ensure that your partnership business lasts for as long as possible?
How Partnership Agreements Ensure Partnership Success
Specification of capital contributions
The partnership contract specifies the amount of money and the value of each of the partner’s individual contributions. By writing down how much cash each partner is contributing and also the contributions in terms of intellectual property, buildings, equipment, time, and efforts, it becomes easier for the partners to evaluate exactly how much is bringing into the business. On top of all that, the best thing that comes out of this level of specification is the ease of partner ownership percentages.
Profit/ Loss Allocation and Capital Draws
Essentially, partners receive the profits earned from the partnership business. In cases where all the partners put in the same amount of effort and time into the operations of the business, the profit share would be equal for all, but we live in an imperfect world, and some partners or one partner take on more responsibilities than the others. For example, a managing partner tasked with overseeing the day to day operations of the business would feel entitled to a bigger share of the profits. To avoid scenarios where the partners disagree about the percentage of the profits they get, the agreement comes in and specifies the preferred methods for profit distribution. Oftentimes, disagreements between the partners would be avoided if the managing partner, for example, earns a salary in addition to the profit. The division of the profits, on the other hand, would be based on capital contributions or ownership percentage. To avoid confusion, you want this specified in the agreement.
Besides the distribution of the profits, the other consideration you need to keep in mind is how often the partners would be allowed to withdraw their profits and how much they can withdraw at a time. By specifying such elements, the partnership contract protects the interests of the partners and the partnership and also ensures the success of the business.
Clarification of the Authority of Partners
The most important aspect when it comes to partnerships is the creation of clear lines regarding the partners’ roles, authority, as well as the things that a partner can do on behalf of the partnership plus their limitations. The partnership agreement makes it easier for partners to work together without stepping on each other’s toes. The specified roles and responsibilities of the partners will not only ensure the short-term but long-term success of the business.
Professional Resolution of Conflicts/ Disputes
The agreement steering the partnership further encourages the success of a partnership by providing guidance when disputes arise. This guidance often comes in the form of a mediation clause that recommends mediation or arbitration for dispute resolution.
The exit of Existing Partners and Onboarding of new partners
By serving as a reference point where partner-related matters are covered, the agreement ensures that the remaining partners know their options and also have specific guidelines to follow to ensure an easy transition or even the termination of the partnership.
If you are interested in creating a partnership agreement in Alexandria, Richmond, Virginia Beach, Norfolk, Roanoke, Charlottesville, or any other city in Virginia, you could download our free partnership agreement form here today.
VA Partnership Agreement
Personalize your Virginia Partnership Agreement template.
Print or download in minutes.