A business partnership is like a personal partnership as both need clearly communicated understandings. Often people in business have both these types of relationships happening simultaneously.
In a personal partnership, if something happens to one of the personal partners or there is a dispute between those partners, most people understand the avenues that exist to resolve these situations. Where something happens to a personal partner the Estate Plan will spell out what is to happen at death or incapacitation. That is why we have not only the Will but an Enduring Power of Attorney that directs financial management responsibility and an Enduring Guardianship that is a form of living will, to signal your wishes if you become incapacitated
In the case of a personal partnership dispute the result may be separation and divorce, with a property settlement and parenting plan (if there are children).
Often couples fail to plan for the “what happens if” the personal partnership dispute interferes with the business partnership.
A partnership agreement is the best way to assure that the business—and personal—part of the relationship can survive both long-term and well. A partnership agreement is essentially a contract between partners, in a partnership, which sets out the terms and conditions of the relationship between the partners, including:
- Percentages of ownership and distribution of profits and losses
- Description of management powers and duties of each partner
- Term (length) of the partnership
- How the partnership can be terminated
- How a partner can buy his/her share of the partnership.
A partnership agreement should be prepared when you start a partnership. A solicitor would typically assist you with the partnership agreement, to make sure you include all-important “what if” questions and avoid problems when the partnership ends.
In addition, when a business partnership is in play it is also wise to ensure you have a Corporate Power of Attorney who can represent your financial and decision-making interests in the case of incapacitation.
If you would like to know more about a Partnership Agreement, please give our team a call on 02 9958 3211.