Partnership Agreements: Six Things Co-founders Should Consider Prior to Partnering

Apart from the name of the partnership, the partners’ names, and the place of business, here are six things that every partnership agreement should include.

Prev2 of 2Next
Use your ← → (arrow) keys to browse

4. Monetary Contributions.

At the very least, you must address how much money or other resources each partner will contribute to the partnership; how many shares each partner will receive; how you plan to allocate depreciation, gain, and loss to each partner for tax purposes; rules for partners loaning money to and withdrawing money from the partnership; and the salary and bonus to be paid to each partner.

5. Accounting.

A related issue your agreement should discuss is accounting. What type of accounting method will your business follow? The cash method or the accrual method? When does your fiscal year begin and end? How will you choose an accountant, and when will you do an annual audit? All of these considerations must be addressed.

6. The End.

Every business should start with the end in mind. Specify what circumstances will result in dissolution (ending) of the partnership. Will death or incapacity of a partner suffice? And if not, then describe the circumstances that would allow the remaining partners to continue operations. If the partnership is dissolved, state the procedure for liquidating the business and distributing the partnership assets.

These are just some of the most important issues you should address to ensure that your partnership has the best chance at success. What experiences have you had with partnership agreements? Let me know in the comments section below.

Connect with Alicia on Twitter.

Did you enjoy this article? If so, subscribe to YFS Magazine and never miss an update. Don’t forget to make our friendship official and join Young, Fabulous & Self-Employed entrepreneurs on Facebook.

Photo: Gant

Attorney Alicia Phillip Gibson, Esq. owns a virtual law firm that serves business clients in NC, SC, and GA. She is an avid entrepreneur herself and enjoys providing cost-effective legal solutions to clients.




Prev2 of 2Next
Use your ← → (arrow) keys to browse

© YFS Magazine. All Rights Reserved. Copying prohibited. All material is protected by U.S. and international copyright laws. Unauthorized reproduction or distribution of this material is prohibited. Sharing of this material under Attribution-NonCommercial-NoDerivatives 4.0 International terms, listed here, is permitted.


In this article