There are many considerations that must be made when starting a business. Among them is the type of legal structure that will be utilized. This seemingly basic decision can lay the framework for businesses operations, liabilities and taxation. Therefore, there is a lot at stake when making this business decision. This can be especially true when creating a partnership.
For instance, prior to creating and entering into a partnership agreements, individuals should fully understand what the terms of those agreements entail. While a partnership agreement should give the business entity a name, it should also address critical matters such as the allocation of profits to the business’s partners. The same holds true for business losses and debts.
Another important term in the partnership agreement is that which pertains to each partner’s authority to make business decisions. To start, all partners are treated equally. This means that any decision by a single partner can become legally binding on the entire partnership business. Those who have concerns about this potential outcome can choose to write their partnership agreement in a way that restricts the authority and decision making power of certain partners. This term may even specify that certain business decisions can only be made with unanimous consent of all or a specific number of partners.
These are just a few of the many terms found in a partnership agreement that can lay the foundation for a business’s operations. These agreements can specify how to bring in new partners, identify each partner’s management duties, and even dictate how matters should be handled in the event that a partner leaves the business or passes away. Those who have poorly written or generic partnership agreements, as well as those who forego a partnership agreement, can find themselves on the losing end of a business deal. This is why it is imperative that Louisiana residents who are seeking to start a new business work closely with a business law professional to ensure that their best interest are as fully protected as possible.