What Is Partnership Resolution Definition?
Partnership resolution definition refers to resolving a dispute between partners in a business partnership.3 min read
Partnership resolution definition refers to resolving a dispute between partners in a business partnership. The way certain disputes in partnership will be handled should be spelled out in the partnership agreement.
What Is a Partnership Agreement?
A partnership agreement is a document that outlines the obligations, requirements, and expectations of business partners. When entrepreneurs form a partnership they should create a partnership agreement to be signed by all parties involved.
This document should be as thorough as possible covering many different scenarios. Consider the different situations that are likely to arise during the lifespan of the company. It is always a good idea to enlist the help of a business formation lawyer when drafting such important documents.
The Uniform Partnership Act was designed to guide partnership through the dissolution process in case they did not form a partnership agreement. Certain states also have laws in place to guide businesses in such situations. Even though there are laws and guidelines in place already, it's still better to formulate your own documents.
What Should Be Included in a Partnership Agreement?
A well-written partnership agreement should include the following information:
- Partnership name and address
- Names and signatures of partners - Signatures signify agreement to everything included in the document.
- Planned length of the partnership - Some partnerships are formed with an intent to dissolve in a certain period of time, maybe after the completion of a specific project.
- Partnership purpose or goal - Most businesses state the goal of legally operating and expanding their business, but some include more specific entrepreneurial goals.
- Banking information - Certain partners may be given the authority to sign checks and handle certain banking duties.
- Contributions of and compensation for partners - When a partner gets involved in a business, they usually give some form of contribution, like money, services, or property.
- Managerial duties of partners - The specific responsibilities of each partner should be clearly spelled out to help avoid disputes.
- Voting rights - Some decisions may be made without the knowledge or consent of other partners, but certain decisions should require a vote.
- Admission of new partners - How will the business handle bringing in new partners?
- Expected work hours and vacation time
- Resolution for disputes - The protocol for partnership disputes should be specified, even if you think a dispute will never happen, which can help avoid legal costs.
- Provisions for amending the agreement
- Buy-sell agreement
What Is a Buy-Sell Agreement?
Every partnership agreement should include a buy-sell agreement. This portion of the document will lay out exactly how partners should handle the death, disability, retirement, or divorce of another partner. In the case that a partner leaves the business for any reason, can the remaining partners buy back their shares?
This may not seem like a crucial question, but it certainly can become one when unexpected events occur. For example, what if a partner dies and their next of kin automatically takes over their ownership in the business? What if this person's views for the partnership don't align with the views of the remaining partners? Being able to buy back those shares could prevent a seriously expensive dispute. This is called a cross-purchase agreement.
A stock-redemption agreement takes place when a company buys the shares of a departed partner instead of the remaining partners. This means that those shares can then be resold to other investors or partners.
Buy-sell agreements are quite simple when a partnership is only made up of two partners, but things get more complicated when several shareholders or owners are involved.
Partnership disputes can arise from many different situations. Even the most successful businesses can encounter disputes. Whether partners are disagreeing on their visions for the future of the company or a new individual wants to join the company, a partnership agreement is essential to keeping the business healthy and thriving through such disputes.
Frequently, partnerships are created between friends and family members with a past together, so disputes can end up being very upsetting and even emotional.
To be sure that a partnership agreement covers all of the necessary bases, a business attorney can look it over and offer advice.
If you need help with partnership resolution definition, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.