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Often, people who have known each other for a long time or gone to college together come up with a creative idea and decide to turn their friendship into a business relationship. In other situations, individuals who do not know one another very well may decide to partner with one another in order to start a business together. Either way, when embarking on a business partnership, it is important to consider drafting a partnership agreement that outlines each party’s duties and responsibilities towards one another, in order to avoid partnership disputes in the long run.
A New York partnership agreement should include the capital contribution that each party is making to the partnership. In addition to this, it should also include the percentage of ownership each party will receive. Though people often assume that cash is the only capital contribution possible, it could be other assets such as property, securities or even certain business skills.
Though everyone wants their business to succeed and it is easy allocating profits in a partnership, it is equally important to share and assign losses in case the business does not do well. One way to allocate profit and loss is according to the ownership percentage of each party, but this does not have to be the only way. Parties should also consider outlining whether they can withdraw their profits yearly or not.
It is also important to include a dispute resolution method in the partnership agreement. It is normal and part of the creative process for individuals to debate with one another and there should be a method for resolving a deadlock in a complex business dispute.
These are just some of the things that should be included in the agreement. An experienced attorney can help New York residents draft a legally enforceable and all-encompassing agreement so that business partners can focus on building their business without worrying about these legalities.
