Always Include These Clauses in Your Business Partnership Contracts
A business partnership is commonly remarked as being “like a marriage.” You tie your livelihood to your business partner, which means precautions must be taken to protect your interests and holdings in the event that certain conditions or situations occur that may negatively impact you and/or your partnership, such dissolving of the company and failure to meet the defined responsibilities. To provide legally-binding protection, your business partnership contracts will contain clauses to clearly define each party’s contractual obligations through appropriate clauses.
A clause is a section of a contract that defines a particular situation or action and describes the responsibilities and expectations of the identified parties in order to address the contingency. In your business partnership contracts, it is imperative to always include these 4 clauses for your protection among others that can be explained by your attorney at Waitz & Downer:
- Partner investment: Also referred to as “contributions,” partner investment must be defined by the amount of funds each partner invests in the business and whether the investment will be paid by the partner to the business in other ways, such as in the case of a “working partner.”
- Return of Investment (ROI): At some point during the life of a business or upon its dissolution or sale, the partners may have their original investment returned. The exact details of when and how this will be accomplished should be covered in the business partnership contract.
- Wages, salaries and/or profit distributions: The manner in which each partner is paid for time and services should be clearly explained. Often, profit distributions are relative to the business’ net profit and can increase or decrease depending on quarterly or annual performance. The manner in which a partner is compensated must be detailed to avoid disputes in the future.
- Dispute Resolution: In the event that there is a major disagreement between the partners, a clause must be created that spells out how the dispute will be resolved, such as through mediation.
- Dissolution: While the hope at the onset of a new partnership is to grow the business, obstacles may demand that the business be dissolved. If the unexpected should occur, there must be predefined terms in place that will govern how the dissolution will be handled.
Contact the Legal Professionals of Waitz & Downer
The expert legal team of Waitz and Downer includes knowledgeable business attorneys that can competently advise you in the formulation of a business partnership and create the necessary contracts to assign the rights and responsibilities of each party involved in the operations of the business. If you are seeking an experienced, professional business lawyer, schedule your initial consultation with the law firm of Waitz and Downer by calling (985) 876-0870.