Why Should I Create a Partnership Agreement?

Avoiding partnership pitfalls with a Mesa Arizona Attorney for partnerships

Many partners go into business without working out the details of their business relationship. Some partners do discuss the details of their business, but never create a written agreement. Failure to create a written document or agree to terms can lead to unnecessary conflicts and confusion. It can even lead to the addition of new terms that no partner intended. Partnership agreements are crucial.

Many states have adopted the Revised Uniform Partnership Act (RUPA). One of RUPA’s purposes is to fill in the missing terms of a partnership agreement with generic terms found within RUPA. This occurs when a term in a partnership agreement has not been agreed to and is under dispute. For example, if the voting method is disputed and is not addressed in the partnership agreement, the court will use the RUPA term that says each partner gets one vote, regardless of what percentage of the business that partner owns. Terms added by the court may not be what any partner intended. To prevent the addition of unwanted terms to an agreement, it is important that the partnership agreement cover all of the significant issues. Forming a comprehensive partnership agreement will create certainty and improve the business’s chances for success.

To minimize the risk of confusion and conflict among partners, an attorney can assist you in forming your partnership and drafting a partnership agreement. The attorney can represent the partnership itself, or all the partners, or one partner, depending on what makes the most sense. An attorney will discuss with you your relationship with your partners and assist in the creation of a written partnership agreement that addresses the specific needs of your business and partnership. A well-written partnership agreement will give a partnership a strong foundation.