Legal Question in Business Law in California

Re: partnership agreement

A partnership agreement will prevent future disagreements. They really are a a necessity, especially if working with a friend or relative, because disagreements between these types of partners almost always lead to over-heated tempers and filings of silly lawsuits.

The idea is to spell out all the possible problems that can occur and create resolutions, or plans on how to resolve the disputes, before-hand.

Thre really are no bad sides to having your agreement in writing, unless one or the other plans to change the terms in the future. Then, you can just include a clause that only allows for change when signed by both parties.

If you would like assistance at writing up a partnership agreement, our firm would be happy to assist you. I can be reached at the email provided by LawGuru, or through one of our firm's sites located at RulesofEmployment.com.

Scott

Re: partnership agreement

If you don't have an agreement in California, you are automatically stuck with the Uniform Partnership Act's terms. If you don't know what they are or don't like them, that's a reason to have an agreement. If you started out liking the person you went into partnership with, then you should have an agreement. I think partnership agreements should be subtitled "Relationship Insurance"! It provides a place to refresh your recollection on what you agreed to do (or not do) and helps provide a path when things get tough or unexpected things happen. People with no agreement go at it like cats and dogs and lose their one-time friend. There are numerous other reasons that you may want to have an agreement, but those two are very simple but important reasons that I advise clients to consider.

Re: partnership agreement

I agree with both prior responses. In a sense, all partnerships have "agreements" whether they be written, oral, or court-supplied. By this I mean that if two or more people are doing business as partners, their relationship may be governed by an express written agreement; an express oral agreement; or, in the absence of any express agreement, a court has the power to infer an agreement of sorts based upon the partners' conduct - the way they conducted the business - and to the extent that gives insufficient clues as to what the deal is, the court will fill the gaps with standard default terms from the California Revised Uniform Partnership Act (RUPA).

The RUPA is codified at Corporations Code sections 16100 et seq. and is worth looking up and skimming through to find subjects of particular interest. Most provisions of the RUPA are written plainly enough to be understood pretty well by the average businessperson.

I cannot think of any major 'cons' to having a written partnership agreement. Minor issues might be the cost to have one drafted (but don't be penny-wise and pound-foolish), or a slight loss of flexibility. These are far outweighed by the advantages. Take it from someone who has handled the nasty break-up of several poorly-documented or undocumented partnerships.