Founding A Start-Up Partnership In Florida? Six Things To Include In Your Partnership Agreement
Florida is a great place to start a new business. According to data from the Small Business Administration (SBA), approximately 85,000 new companies are formed in the state each year. Crunchbase reports that South Florida has become one of the nation’s hottest markets for start-up companies—with start-ups in the region raising more than $1 billion in early state funding in 2021.
If you are preparing to start-up a new business partnership in Florida, it is imperative that you have the right structure in place for your company. A comprehensive partnership agreement is a must. Here, our West Palm Beach partnership dispute lawyers highlight six important things that should be included in your agreement if you are founding a new start-up partnership in South Florida.
- Capital Contribution
As a starting point, you need to know who is putting what into the business. The initial (and ongoing) capital contributions of each party must be well-defined within the partnership agreement. Further, the agreement should clarify if partners are required to contribute additional capital if necessary.
- Ownership Percentage
A business partnership agreement for a new start-up company should also specify each party’s ownership stake in the business. Considering the capital contributions, how much of the partnership does each partner actually own and what are the rights regarding ownership?
- Distribution Rights
Distribution rights are also critically important. You need to know exactly when and how parties can take distributions from the business partnership. There should never be confusion about key financial matters. You do not want to end up in a conflict where one partner is trying to take money out of the business when the other partner believes that it is not allowed.
- Decision-Making Authority
An effective business partnership must be nimble in order to respond to changing market conditions or time-sensitive client needs. Day-to-day decision-making authority should be addressed within the agreement. It may or may not be identical to ownership stake.
- Amendments to the Agreement
When you are forming a start-up company, it is not always possible to anticipate all of the future needs of the business. For many different reasons, you may want to make adjustments to your partnership agreement or business structure in the future. Your initial partnership agreement should include a clear, manageable process for making amendments as necessary.
- Dispute Resolution
Conflict can arise in a start-up business—even if the partners have a good relationship and generally see eye-to-eye. A properly drafted partnership agreement should always have provisions for dispute resolution. For example, you may want to include a clause calling for mandatory mediation of any partnership disputes.
Call Our South Florida Partnership Law Attorneys Today
At Pike & Lustig, LLP, we are devoted to helping business owners and entrepreneurs find solutions. If you have any questions about negotiating or drafting a partnership agreement for a new start-up company, we can help. Get in touch with us by phone or reach out directly online to set up your initial meeting with a lawyer. Our firm provides partnership law representation throughout South Florida, including in West Palm Beach, Palm Beach Gardens, Fort Lauderdale, and Miami.