Sample West Virginia Partnership Agreement
Mistakes to Avoid When Creating a Partnership in West Virginia
One of the most important steps you’d have to take when creating a business is to determine the befitting business structure for your business. The business structure you settle on determines tax and liability implications, and this determination offers a wide range of advantages. If you are looking for a business structure that offers the best advantages, one that comes with fewer rules, you may want to create a business partnership.
But even with all the benefits that partnerships offer, you are bound to make mistakes, but you don’t want to make those mistakes since they could cost you the business. To ensure that doesn’t happen, below are some of the most common mistakes made by partnerships, mistakes that you should avoid if you wish to run a successful business. Since these mistakes would result in the dissolution of a business partnership, you need to be wary of them. They include:
Partnering with the wrong person
For the most part, business partners are united by a common goal, and they have similar goals. Unfortunately, there are cases where a partner or partners decide to bring someone else on board because of the unique skills and abilities that the other party brings to the table. In other cases, the partner is brought into the partnership because of finances when you need someone else to shoulder that financial burden. No matter the reason, this is often a terrible legal mistake that you must avoid at all costs. If you are interested in building a partnership business that lasts, you should avoid taking advantage of a potential partner, hire them instead, and find alternative means of finding the capital you need.
Failure to create a partnership agreement
One of the biggest reasons why partnerships fail is the absence of partnership agreements. The partnership agreement, also called a partnership contract, is a legally binding agreement that specifies the roles, rules, responsibilities, and the relationships that guide the operation of business partnerships.
The partnership agreement specifies the conditions for different elements that ensure the efficient running of the partnership business. Some of the important aspects covered by this agreement include finances, capital contributions, and partner authority, among other functions.
You could create this partnership agreement using our free West Virginia partnership agreement form. This partnership agreement template features everything you need for the success of your business.
Inappropriate capital sharing plans
The other mistake you need to avoid is assuming that capital sharing will be a 50-50 split. In as much as you’d like equal ownership of the business, it’s likely that this will not be the case. Even with the potential split in your capital investments, one partner would shoulder more responsibilities than the other, meaning an unequal share of the capital. To avoid disputes, you need to create a formal legal agreement specifying the capital ownership of the partners. This is an important consideration, and you shouldn’t overlook it. Remember that you need to protect your business interests, and that will only be possible if you lay out the specifics of the capital sharing in a written agreement.
Sharing of business liabilities
The other legal mistake that most partnerships make is the failure to agree on the extent of partner liability affecting the assets/ capital contributions of the other partners. Often, this mistake results from the absence of specifications and limitations on the authority held by the partners. As a result, a partner may take on more liability than they can shoulder, resulting in the liability spilling over to other partners. Naturally, the partners not consulted in the decision will feel wronged, and the liability, along with the decision of the other partner, could create conflict. No one wants to be on the hook for the mistakes of someone else. Therefore, if you want your partnership to last long and run successfully, albeit, with a few manageable squabbles, you need to ensure that the written partnership agreement created specifies the authority of all the named partners, as well as the limitations to the partners’ authority.
Absence of Non-Compete Agreements
Besides defining and specifying the authority of the partners, you also need to ensure that your partnership’s structures include a clause to stop the partners from engaging in businesses that compete with the business of the partnership directly. Doing this ensures that all the partners are actively involved, and the non-performing partners would be weeded out in time.
Failing to make exit provisions
It’s also important to prepare the measures that would ensure the smooth dissolution of the partnership in different circumstances. Set out terms and conditions to govern the exit of partners and the dissolution of the partnership. Some of the conditions for the dissolution of the partnership should also be specified, for example, death, incapacitation, bankruptcy, etc.
The good news is that you would avoid all these mistakes with the partnership agreement in West Virginia.
So, to get started with your partnership’s agreement document in Morgantown, Charleston, Huntington, Martinsburg, Beckley, Wheeling, Parkersburg, or any other city in West Virginia, download our free partnership agreement form today.
WV Partnership Agreement
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