Partnership agreements may not seem like the most important tools busineses have their toolboxes, but they are. Why? Well, most partnerships fail because of unmet expectations. Partners get into business, but don't have a detailed discussion of the vital aspects of the business, including management disputes, partner departures, or even potential disability and death.
Without a properly-written and comprehensive partnership agreement that addresses issues like these, the partnership could be derailed by a minor dispute—the entire venture could even become worthless if an unexpected tragedy were to strike!
A comprehensive partnership agreement sets the new business off on the right foot, with all the partners in agreement about its trajectory and goal. A partnership agreement is like a knight's shield that protects the value of a business by mitigating risks to the business, the partners, and their assets.
As many readers will know, “partnership” and “partners” can mean many things. For this reason, it’s vital that we define exactly how we will be using this term in this guide before we go forward.
In what follows I will not be using “partnership” and “partners” in the strictly legal sense. This is not a guide about general or limited partnerships as business entities. Instead, what we’re going to talk about are partnerships in the general, much broader sense of multi-owner businesses.
Some of the most successful businesses ever created began as partnerships: Google, Microsoft, Hewlett Packard, even Facebook (although, if you’re the Winklevoss twins, this last one might be of better use as an example of how not to form a partnership!).
That partnerships would be benefit founders makes perfect sense. Starting and growing a successful business takes a lot of work. It’s much easier to get off the ground and flourish if you share the burden—both creatively and financially.
You may have heard a business owner or two tell you that partnerships don’t work and that you’re better off going it alone. They typically follow this “advice” with a cautionary anecdote about what a former partner did or did not do, and how it ruined the relationship.
As I’ve already said, a well-planned and documented partnership can propel a business to much higher levels of growth and performance than a solo business venture. So, then why are there so many of these naysayers?
No matter the time and effort you put in to drafting a partnership agreement (or any contract for that matter), there are limits to what it can protect you from.
There simply are certain things—both pragmatically and legally—that a partnership agreement cannot do for you, and anyone looking to enter into a partnership must remember that a partnership agreement is not a panacea.
Step 1: Partnership Design Session
During the Partnership Design Session, the design parameters are raised and described one-by-one, partner questions are answered, recommendations are made, and the advantages and disadvantages of the options are discussed. All design parameters agreed upon by the partners will be recorded on the Partnership Design Roadmap, a non-binding record of the results of the Partnership Design Session.
The fixed fee for the Partnership Design Session is $995.
Step 3: Agreement Review and Execution Meeting
The partnership agreement is reviewed, paragraph by paragraph, with the members and the terms from the Partnership Design Roadmap are identified. All partner questions are fully answered, the agreement is executed, and partners are given membership interest certificates and an electronic copy of the fully executed agreement. If any documents must be filed with the state, we’ll complete the filings and provide copies of the filed documents to the members.
The fee for Step 2 and 3 is $3995, plus $295 for the 4th and each additional partner.
Step 2: Partnership Agreement Preparation
Our firm will draft the operating agreement for your business utilizing the Partnership Design Roadmap that was agreed upon during the Partnership Design Session.
Once the draft operating agreement is completed, it will be sent electronically to the members before the Agreement Review and Execution Meeting. Though not required, each partner is highly encouraged to read the operating agreement in advance of the meeting and to write down any questions.
Step 4: Post-Execution Q&A Period
Every prepared partnership agreement comes with a complimentary thirty (30) day question period after the agreement is signed where we’ll answer any of the partners’ questions about the agreement, without charge.
If a partner isn’t sure about part or all of the agreement, we’ll take as much time as is necessary to bring him or her up to speed. Simply call or email our offices, and we will set up a time to speak with you.
Whether members of a limited liability company or shareholders in a closely held company, a partnership’s potential for success is highest when the partners have identified and documented all of their expectations (whether known or unknown to the partners) and examined the critical business arrangements. This discussion is difficult and requires the guidance of an objective professional who understands the issues from experience.
Download our guide and contact us today to schedule your Partnership Design Session.