Business Development Partnership Agreement
A business development partnership agreement is essential to protect the rights of each partner.3 min read
Updated November 19, 2020:
A business development partnership agreement is essential to protect the rights of each partner. Without such an agreement, each party is 100 percent liable for the business, even if they only own a small portion of it. Additionally, a business development partnership agreement limits who can perform transactions on behalf of the company.
Types of Partnership Agreements
There are several kinds of partnership agreements you can choose from when forming your business.
- In a general partnership, each partner will contribute to running the business. They will also be responsible for any liabilities incurred on behalf of the company. This means that if one of the partners is sued, then all the other partners can also be held liable for their actions. For this reason, many people avoid general partnerships since they don't want to be dragged down by their partners.
- In a limited partnership, the agreement can be both limited and general in scope. Partners are limited in their obligations, meaning they might not be responsible for the actions of the company. Most of the time, limited partnerships are ideal for big investors who wish to receive a share of the company but don't want to be involved in day-to-day management.
- In a limited liability partnership, the business has characteristics of both a partnership and a corporation. This means that the partner will have limited liability for any mistakes another partner or employees of the company make.
- In a qualified joint venture, the two partners involved are married and own a business together. Because of the agreement, they can file a partnership tax return separately.
- In a joint venture as partnership, two or more entities will come together to work toward a mutual goal. While they will not legally form a single entity, they will work as one for a specified period to achieve a predefined goal.
What to Consider When Composing a Business Development Partnership Agreement
If you're thinking of creating a business development partnership agreement, there are many questions you'll need to ask yourself. Some of them might include:
- How many shares will each partner have in the business?
- What will be the title for each partner?
- Is there a description of responsibilities or job duties for each partner?
- How much authority will each partner have?
- How much will each partner need to invest?
- Is there a certain amount of time each partner should dedicate to the business each week?
- How will profits, losses, and depreciation be distributed to each partner on a monthly basis?
- What will each partner do if the company requires more capital?
- How will each partner be responsible for future investments?
- If a partner does not fulfill their time obligations, what should be the penalty?
- If a partner does not fulfill their investment obligations, what should be the penalty?
- If a partner suffers an injury, how will that affect their investment and time obligations?
- If a partner passes away, are there rules in place that specify what happens to their shares?
- Is it possible to transfer a partner's shares to another person?
- How will the investments of each partner be valued?
- In the event that a partner wishes to depart the partnership, what would be the procedure?
- Do the two partners require a non-compete agreement?
- Can one partner become involved or invest in a competing business?
- If loans are required, how much will each partner be responsible for?
- Are there certain activities or actions that each partner must agree upon?
- Are there any business expenses that each partner must agree upon?
Outline of a Sample Consulting Partnership Agreement
While every consulting agreement will contain different details, the basic structure will remain the same. The first section will describe the scope of work and might include sections on:
- Time and availability.
- Standard of conduct.
- Outside services.
The main section in an agreement contains information about the independent contractor. It might include information such as:
- Who the independent contractor is.
Next comes a section on compensation for consulting services. It will cover:
- How much the company will pay for the consultation.
- Reimbursement for certain expenditures.
You might also want to cover the term and termination of the agreement, confidentiality, rights and data, conflict of interests, the right to injunctive relief, and any other general provisions.
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