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Pike & Lustig, LLP. We see solutions where others see problems.

Essential Legal Considerations for Business Partnerships


Forming a business partnership can be a promising venture. The excitement of starting a new enterprise is considerable, however you must be careful. It is essential to lay a solid legal foundation to prevent potential conflicts and avoid any future litigation. The following are some of the most essential legal considerations for business partnerships:

  1. Partnership Agreement: A well-drafted partnership agreement is the cornerstone of any successful partnership. This document outlines the rights, responsibilities, and expectations of each partner, including profit-sharing, decision-making processes, and dispute resolution mechanisms. It should be written with the help of an experienced business attorney to ensure it addresses all relevant aspects of the partnership.
  2. Business Structure: Choose the most appropriate business structure for your partnership, such as a general partnership, limited partnership, limited liability partnership (LLP), or limited liability company (LLC). Each structure offers different liability protection and tax implications, so consult with an attorney and tax advisor to select the best fit. To decide what structure is best for your business, consult an experienced business litigation attorney.
  3. Contributions and Equity: Clearly define each partner’s contributions to the partnership, including financial investments, intellectual property, skills, and labor. Establish the equity split based on these contributions.
  4. Roles and Responsibilities: Define the roles and responsibilities of each partner within the partnership. This includes operational duties, decision-making authority, and management responsibilities.
  5. Exit Strategy: Plan for the possibility that a partner may want to leave the partnership. Include provisions for the buyout of a departing partner’s interest, non-compete agreements, and steps for dispute resolution in case of disagreements over the partner’s exit.
  6. Non-Disclosure and Non-Compete Agreements: Depending on the nature of your business, consider implementing non-disclosure and non-compete agreements to protect sensitive information and prevent competition from departing partners.
  7. Decision-Making Mechanisms: Establish a clear decision-making process to avoid disagreements and confusion. This may involve unanimous voting, majority voting, or specific responsibilities for certain partners.
  8. Capital Contributions and Distributions: Address how capital contributions will be made and how profits and losses will be distributed among partners.
  9. Dispute Resolution: Include a clause outlining the preferred method of dispute resolution, such as mediation or arbitration, to avoid costly and time-consuming litigation.
  10. Insurance Coverage: Obtain appropriate insurance coverage for the partnership, including general liability insurance, professional liability insurance, and key-person insurance.
  11. Comply with Legal Requirements: Ensure your partnership complies with all relevant local, state, and federal laws and regulations. This includes business licenses, permits, and tax obligations. To ensure your business is compliant, seek the advice of a qualified business lawyer.
  12. Regular Communication: Foster open and transparent communication among partners to address concerns and avoid misunderstandings.
  13. Annual Review: Regularly review and update the partnership agreement to accommodate changes in the business or the partners’ circumstances.

By addressing these legal considerations and establishing a clear and comprehensive partnership agreement, you can minimize the risk of disputes and litigation within your business partnership. Seeking legal advice from an experienced business litigation attorney will help ensure that your partnership agreement is well-crafted and tailored to your specific needs. To talk to the experienced business litigation attorneys at Pike & Lustig, call 561-291-8298 today.

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