Sign General Partnership Agreement Online

How to eSign a document: partnership agreement involving silent partners form

Hi folks, Dave waring here from Fitsmallbusiness.com and today's lesson of the day. In our lastlesson we continued our series on how to start a successful business, with a look at howto choose a business partner. In today's video we are going to continue that series, witha look at partnership agreements. So let's get started!A partnership agreement serves many purposes, two of the most important of which are gettingeveryone on the same page about dispute resolution and business structure:Dispute Resolution: Every relationship has disagreements, and this is especially truein relationships where lots of decisions have to be made. A carefully crafted partnershipagreement allows you to outline how disputes are going to be handled ahead of time, insteadof in the heat of the moment. Business Structure: The process of puttingtogether a partnership agreement forces everyone to think about and get on the same page abouthow the business is going to be structured and run from the beginning. This minimizesmisunderstandings down the road, and hopefully prevents many issues from occurring at all.Should you use a lawyer to put together your partnership agreement?If you can afford it, its almost always a good idea to have an attorney involved withyour business agreements. However, most attorneys are going to bill you by the hour, and likelydo not have the same level of knowledge about your partners that you do. Because of this,its always better to have a good outline of what you want in the agreement before speakingto a lawyer.If you cannot afford an attorney then I have linked to a resource page in the descriptionsection of this video which includes some free templates.Here is an overview of the Elements that every partnership agreement should contain.The BasicsThe name of the company and any other names that the company will be operating under.Statement of the company's purpose. Generally you will want to keep this fairly broad soyou have the flexibility to adapt.ResponsibilitiesDecide who is going to be responsible for which parts of the business. As discussedin our video on how to find the right business partner, at a minimum you need a partner involvedwith delivering your product and/or service, selling/marketing, finances, and management.List out any other areas that need to be covered and decide who is going to be broadly responsiblefor those areas.WorkloadHow will the workload be shared? Answer the following questions:Are partners expected to work set hours? Does one partner plan on working more or lessthan the other partners? How much vacation is allowed?Will this be a full time role for each partner or are partners allowed to conduct other typesof business outside of the partnership? If so then what types of business are theyallowed to conduct?ContributionsNext you want to determine what each partner is bringing to the business in terms of cashinvestment, physical property (equipment, office space etc), and intellectual/othertypes of property (software code, client lists etc.)Once you have listed everything out you want to discuss what restrictions if any thereare on those assets. Here are some examples:Personal Property Example: You are starting a landscaping business and someone has a ridinglawnmower. Does that mower become the property of the business?Client list Example: You are starting brokerage firm and one of the partners brings clientswith them. Does 100% of the revenue from those clients flow into the business?Intellectual Property Example: Someone brings code for software into the business. Is thatcode now owned by the business? Can other partners modify it?CompensationThis section should answer the following questions:Will partners receive a salary? If so how much and when.If a partner is taking less salary will this be made up in the future?Do you plan on reinvesting profits back into the business?If so at what point do you plan on taking out profits?How and when will profits be divided up amongst the owners? (if based on ownership see nextstep) How will losses be handled?Ownership SplitNow that you have decided on responsibilities, workload and which partners are contributingwhat to the business, you can come to an agreement on how ownership is going to be shared inthe business. I have included two resources for how to cover ownership splits in the resourceslink in the description of this video.Business AuthorityThis section should answer the following questions:Contracts: Does each partner have the authority to sign contracts on behalf of the business?Debt: Is the business going to have a credit line? Keep in mind here that, depending onthe business structure that you choose, each partner may be personally liable for this.Spending: Does a partner have the ability to make purchases without consulting the otherpartners? (Generally there is a limit that is set in the agreement above which pointthe partner must obtain permission from the other partners.)Partner Death/DisabilityWhat happens if a partner dies or becomes unable to participate at the same level becauseof a disability? Most business owners probably do not want their deceased partner's heirsto be their new business partners. To prevent these types of issues a buy sell agreementwill be included.I have included a resource for crafting buy/sell agreements on the resources page which islinked to in description section of this video.Partner ExitAnswer the following questions:Voluntary Exit: What happens if a partner wants to leave the partnership and pursueother interests? Involuntary Exit: Under what circumstancescan a partner be forced to leave the business?These questions can also be handled in the buy sell portion of the agreement.Partner DisputesBeing able to discuss and come to an agreement on the differences of opinion that will arisein any business is a must for any good partnership. However, there will be times even in the bestpartnerships where you are not able to come to an agreement on a specific topic. Hereare some ways that this can be handled:The CEO has the final say. One partner has the final say on a particularpart of the business. For example on hiring and firing disputes it may be the CEO, forproduct development disputes the partner who is in charge of product has the final say.Vote based on ownership. Partners agree to use an outside mentor toresolve disputes. Partners agree to use an outside advisoryboard.Other more formal options are:Mediation - Working with a professional mediator can help partners come to an agreement onissues that they were not able to alone. For more on this option see this article fromattorney Emily Doskow at Nolo.com. Arbitration - If you are not able to cometo an agreement through mediation then Arbitration, which binds the partners to the decision madeby the arbitrator, is the next option before going to court. For more on this option seethis article from Barbara Repa also at Nolo.com. Litigation - If things get this far arbitrationis usually the more efficient option but if you want to have litigation as an option thendefine which state will have jurisdiction.New PartnersWhat is the process for deciding on bringing in a new partner? Majority vote? some othermethod?Selling the BusinessUnder what circumstances can the business be sold? This likely goes back to the buysell agreement.That's our video for today. If you have any questions or comments please leave them inthe comments section below. Also be sure to stay tuned for the next video in our serieson how to start a business where we will discuss how to choose a legal structure for your business.For more free advice on how to start and run a successful small business visit us at fitsmallbusiness.comtoday.Thanks for Watching!