Creating a partnership agreement is one of the most important things you can do before investing time and money in a joint venture. While it is legally possible to create a business partnership without a partnership agreement, entering into business without an agreement can lead to personal and financial issues between partners down the road. Enlisting the help of experienced contracts lawyers will ensure that the partnership agreement covers all elements of the business relationship among the partners. While every partnership agreement will be different, there are certain issues which are typically covered, including:
Initial Investment The first item in a partnership agreement includes the individual amount each partner has invested, including the building or other real property, as well as specialized equipment for the business. It is essential to itemize these types of investments. Roles and Responsibilities Another important element of a partnership agreement is to determine what the roles and responsibilities of each partner will be. Oftentimes the partner who invests the most does not want to have an active role in managing the business. On the flip side, partners may decide to determine control of the partnership based on the amount invested, or split control equally. Determining the roles and responsibilities of each business partner is vital, as the success and growth of a business often relies on the competency of its management. Profit Sharing and Financial Management Profit sharing and financial management are also key elements that should be outlined in any partnership agreement. Partners may opt to invest a certain percentage of profits back into the business, and partnership agreement will also determine whether managing partners will receive a salary and how much it will be. Seasoned business attorneys can help guide you through the process of what kind of compensation is fair considering your amount of investment. A few key questions to take into consideration when it comes to financial management of day-to-day operations are:
Managing Disagreements The partnership agreement should also include a method for managing disagreements. While partnerships are often started by friends or colleagues, disagreements happen, and it can be helpful to determine how the partners will work out these disagreements ahead of time. A neutral mediator can be a constructive way to resolve issues. Death, Disability and Dissolution It is best to be prepared with a business succession plan that is briefly outlined in your partnership agreement. It’s important to determine who you trust to make decisions on your behalf, who will inherit your shares of the company, and whether you want your beneficiaries to have a say in what happens to the business. Conversely, you should outline whether you would be willing to share power with your partner’s spouse or family member. It is also imperative to discuss what will happen if one of the partners decides to leave the business. Creating an exit strategy and putting it into the partnership agreement can save a lot of headaches down the road. The partnership agreement can provide details on the buyout process, including each partner’s investment and what rights departing partners will have if they want to start a similar business. A comprehensive and thoughtful partnership agreement can lead a business down the path to success and help it flourish Our experienced lawyers in Montgomery and Delaware counties can help you to map out all aspects of your partnership and get your business off to a running start. This post was originally published at https://carosella.com/do-you-need-a-partnership-agreement/ #Partnerships, #PartnershipAgreements
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Business succession planning is the process of determining how to transfer business ownership and relinquish your management role in the business. The business succession planning process can be very complex and personal, especially in a family business. Before a business succession plan can be outlined, it is important to consult with experienced business lawyers who will help you through the various factors that must be considered. Qualified business attorneys can streamline the process so that your plans and goals for the future are clearly defined and your family’s financial security stays intact.
Why plan in advance? Without a plan in place, an unforeseen event such as the death or disability of you or a business partner can have drastic consequences for your family. Planning ahead can ensure that you, your business, and family are protected. If you wish to have your business taken over by family members, you will most likely need to coordinate your business succession plan with your estate plan. Making sure your own finances are in order for retirement is integral to the process as well. Consulting with skilled estate planning lawyers about expectations, family dynamics, and goals for the future is essential when doing small business succession planning. Where do I Begin? Planning for you family’s financial security must include serious and open communication. Everyone who is involved needs to be fully aware of the current state of the business and plans for the future. You can prevent a lot of heartache down the road by creating a strategic plan that includes operating policies, a code of conduct for family members, and a consensus on what the family's role in the business will be. After determining a successor, develop a plan to transfer leadership, including arranging for successor training and setting a retirement date. Creating a Business Succession Plan A well thought-out succession plan can allow you to pass the business on to family members while minimizing and deferring tax liability. A variety of strategies can be used to pass on the business, including:
Some business owners wait until death to transfer their business interests to their children. A self-canceling installment note may also be used in a sale to family members. This option allows the balance of the note to be canceled in the event of your death. If you have a taxable estate, the children receiving the business may also need life insurance to pay estate taxes. Insurance policies owned by irrevocable life insurance trusts will allow beneficiaries to receive proceeds which are both income and estate tax-free. There is no “one-size-fits-all” succession plan that will work for every business. Plans are often adapted due to factors such as the market conditions, plans for expansion and health of the parties involved. Consulting with qualified and experienced attorneys in your local area can help you effectively pass your business on to your heirs and facilitate a smooth transition for both you and your family. Carosella & Associates, P. C. is one such firm located in West Chester, PA providing business succession planning services to its clients. #BusinessSuccessionPlanning, #SuccessionPlanning
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