Articles of partnership is a contract that forms an agreement among business partners to pool labor and capital and share in profit, loss, and liability. Such a document acts as a rule book for limited partnerships by outlining all the conditions under which parties enter into a partnership. Articles of partnership may also be referred to as a partnership agreement, especially outside of North America.
Of all the aspects of a partnership, how partner contributions are handled is among the most important.
Parties agree to articles of partnership voluntarily. An articles of partnership agreement is not legally required by any regulatory body but is considered a best practice. Articles of partnership can be useful in preventing and resolving disagreements among partners since it clarifies the terms of the relationship and outlines how a partnership's assets are shared.
Articles of partnership should indicate who has what duties, but it doesn't have to delegate every task that could conceivably come up. It should assign certain key duties, such as who is responsible for keeping track of income and expenses and who will manage inventory, and specify what decisions can be made by whom. In addition, you should consider including clauses discussing whether partners are allowed to work for other companies outside the partnership.
When the partnership will begin and, if not infinite, when and how it will end
Each partner's capital contribution
Each partner's percentage of interest in the partnership
How the partnership's profits will be distributed (equally is the default, but there may be special conditions)
How the partnership will be managed
How salaries (if any) will be distributed
How and under what conditions partnership rights can be transferred or sold
For example, if one partner provided the initial idea for the partnership but no cash, and the remainder of the partners contributed an equal sum, will each partner be considered equal regardless of cash contribution?
Similarly, an articles of partnership agreement can remove the possibility of disputes over which partner is responsible for certain duties and which partners have special privileges or are in charge of specific tasks. It may also award a partner the authority to make decisions without the consent of other partners and how to treat partners who want to work outside of the partnership or leave it outright.
Such an agreement will help a partnership avoid potential disputes related to profit or loss distributions by setting rules governing it ahead of time. For example, if a partner contributed more time or money than other partners, they might expect a larger share of the profits.
This deed of partnership is made on [Date, Month, Year] between: [First Partner's Name], [Son/Daughter] of [Mr. Father's Name], residing at [Address Line 1, Address Line 2, City, State, Pin Code] hereinafter referred to as FIRST PARTNER. [Second Partner's Name], [Son/Daughter] of [Mr.
Names and addresses of the partners involved in the partnership. The purpose and nature of the business. The contribution of each partner in terms of capital, assets, or services. The roles and responsibilities of each partner in managing the business.
Start with a basic agreement on roles, responsibilities and control.Then, plan to hash out other issues as they arise over time, she said. If you're adding a partner because he or she offers something you lack, make that clear. Spell out your long-term goals as well to make sure you're on the same page.
The easiest way to prepare a business partnership agreement is to hire an attorney or to find a customizable template. If you're writing your own agreement, find a template for a company that's similar to the business you're starting.
The articles of partnership are a legal covenant that may be expressed orally or in writing, and forms the basic foundation for governance of the partnership.
What the articles of partnership spell out: Each partners rights and responsibilities and how profit and lawsuits will be shared. Three advantages of partnership: Ease start-up,Financial impact,and Little government regulations.
You don't have to file paperwork to form a partnership—you create a partnership when you agree to go into business with another person. While you can form a partnership without formally filing or registering the entity, partnerships must comply with licensing and tax requirements that apply to all businesses.
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