Never Signed a Partnership Agreement? You Might Still Be in A Legal Partnership
Across Florida, many people choose to set up their business as a partnership. A partnership is a ‘pass through’ entity that offers major advantages in many situations. While most business owners are broadly familiar with the idea of a partnership, many are not aware of the fact that a legally valid partnership can be formed even if no agreement was signed. If you are forming a partnership, or operating a partnership-like business entity, you need a well-drafted partnership agreement. For additional information on partnership agreements and partnership disputes, please contact an experienced business litigation attorney.
When Does a Partnership Exist?
Under Florida law, a partnership is defined very simply: it is an association of two or more people, or entities that have joined together in a profit-making business venture. This means that under the law, partnerships can be binding without a written agreement. Further, an oral agreement is not even necessary in all cases. An implied agreement can sometimes be sufficient. As was explained by the Fourth District Court of Appeal in the case of Rafael Roca v. Lytal & Reiter, the existence of a legal partnership will be assessed on an objective basis. This means that business partners might not even realize they are entering into a partnership. If their actions are consistent with actions of partnership, a partnership exists. The objective actions of the parties matters, not their subjective intentions.
You Need a Written Partnership Agreement
If you are involved in a partnership-like business association, it is strongly in your best interests to obtain a written partnership agreement. By failing to do so, you are putting your legal rights and financial interests at risk. Beyond that, the lack of a well-crafted partnership agreement will increase the odds that a costly dispute will arise. The bottom line is simple: get yourself a written agreement. While partnership agreements should always be highly individualized to the unique needs of the specific business, they should also always address the following three broad issues:
- Decision-making: Many business disputes arise because there is not a clear method for making important decisions. Your partnership agreement should provide guidance for how decisions are to be made, and also how any disagreements will be resolved.
- Financial contributions and rights: A partnership agreement should also outline, in detail, the financial contributions of all parties involved. Additionally, the corresponding financial rights must included. The agreement must answer key questions, such as if any party will take a salary and how the partnership makes distributions. There must be full clarity regarding those questions.
- Dissolution: Finally, partners need to remember that all businesses eventually come to an end. Your agreement must address issues related to the dissolution of the partnership. The failure to adequately consider this issue could lead to major problems in the future.
Are You Involved in a Partnership Dispute?
The experienced West Palm Beach business litigation attorneys at Pike & Lustig, LLP can help. We have extensive experience helping our clients resolve partnership disputes in a cost efficient manner. Please do not hesitate to contact our office today to learn more about what our attorneys can do for you. Our firm represents clients throughout the region, including in Broward County and Dade County.