Business owners enter the business with optimism and good intentions. However, disputes between trading partners are all too common and risk destroying the entire enterprise. A well-developed partnership agreement can protect homeowners` investments, significantly reduce business disruptions, and effectively resolve disputes when they arise, and later save owners tens of thousands of dollars in legal fees. The reason why it is important to have a written social contract is that, if there is no written agreement, the provisions of the law that are more than one hundred years old apply and the standard position defined by law may not be attractive to partners. Perfect Printing has now made a profit of $100,000 that Alan, Brian and Charlie shared. However, Alan says $50,000 belongs to him because he contributed 50%, while Brian and Charlie each contributed 25%. Brian and Charlie disagree and say the $100,000 should be shared equally among them. The purpose of a partnership agreement is to protect the owner`s investment in the business, regulate the way the business is managed, clearly define the rights and obligations of partners and define the rules of cooperation in the event of disagreement between the parties. A well-written partnership agreement will reduce the risk of misunderstandings and disputes between owners. Also remember that the partnership agreement is there to protect all parties involved and protect the business as an autonomous community. Provisions should be included in a written partnership agreement to acquire the outgoing partner`s share of the partnership in the event of death, retirement or expulsion of a partner.
Imagine there being a partnership company, Perfect Printing, which was created with US$10,000 by Alan, Brian and Charlie. Alan contributed $5,000, Brian and Charlie $2,500. Since everyone agreed and there was no legal fees to pay, they all agreed that a written partnership contract was not necessary.