What Do I Need to Start a Business Partnership in Georgia?
Suppose you’re just beginning the journey of starting a new small business, or you’ve been working for a long time on something personally that you’re ready to turn into a business officially. In that case, the good news is that you have several options for making that official change.
Some business owners prefer to create a sole proprietorship because they are the only person involved. However, a sole proprietorship is not an option if you start a business with someone else. That’s when you should consider forming a business designed as a partnership.
If you believe a partnership is the right direction for your business, there are decisions you need to make and things you need to know before you make it official. For instance, you may trust the person you partner with for your business. Still, trust and a “handshake” are not great foundations for a company, especially one involving many decisions, potentially lots of finances, and plenty of room for differing views and disagreement. That’s why creating a clear and valid partnership agreement is in your best interests, your partner’s, and the company’s overall health.
A skilled law firm like Oliver Hughes LLC has years of experience developing effective partnership agreements. They can answer all your questions and put your mind at ease about forming your partnership.
What Elements Should be Included in an Effective Partnership Agreement?
Aside from the obvious elements that identify the business and parties involved (details such as the name of the business and the names of any parties who will be partnering), several ideal elements belong in an effective partnership agreement. Some of the key components are listed here below:
Company Purpose
While this may seem obvious to you now, it’s essential to clearly define the company and its intended scope and purpose in a partnership agreement. This shows that the parties agree on the goals and aims of the company, preventing any confusion and providing an agreed-upon guideline regarding the nature of any business decisions.
Contributions of Capital
Start-up costs are often needed when a business is just beginning. Partners may have split these costs, which should be noted in the agreement. It is also important to note whether one or the other business partners made the entirety of the initial investment. The agreement should be a clear document presenting the details of the company’s origins.
Ownership Interests
One of the most critical elements of a partnership agreement is a clear representation of the specific percentages of how much each partner owns in the company. This prevents any issues or confusion surrounding the division of profits, a key factor that can otherwise cause serious problems.
Profit and Loss Distribution
Similar to ownership interest, it is extremely important to have a clear breakdown of how loss is dealt with between the partners, how profit is divided among the partners, and how the company will distribute those profits.
Voting, Management, and Decision-Making
The partnership agreement should also spell out the division of responsibilities for managing the company and the level of decision-making and voting each partner will possess.
Addition or Removal of Partners and Dissolution
There should be a clear plan for how processes will take place for large decisions like bringing on new partners or the departure of partners. The same goes for deciding how to liquidate the business and distribute the profits in the unfortunate event that the company needs to be dissolved.
Are There Other Documents That I Need to Form a Partnership?
While the above-mentioned elements and components are vital for a thorough and effective partnership, additional documents can and should be assembled to strengthen and protect it further.
Notice of Partnership Withdrawal: This document may never be used, or at least not for a long time, but it is still worth having created and at your disposal. It clearly outlines the process a partner must undertake if they withdraw from the business. It allows everyone to know and sign off on the process.
Assignment of Partnership Interest: This is exactly what it sounds like—a detailed explanation of the current partnership interests and a road map for transferring them if necessary.
Partnership Amending Agreement: It would be ideal if a partnership agreement were created so effectively and thoroughly that no changes were ever needed. However, individuals and partnerships change, and companies need to be flexible in adjusting to the resulting changes. That’s why an amending agreement can clarify the process for making changes to the existing partnership agreement.
Business Plan: A more detailed expansion of the Company Purpose from the agreement, this document lays out much of the structure, intent, and planned execution of the business. It can be very helpful to have this in conjunction with a partnership agreement to give the partners peace of mind about being on the same page with the company’s goals and intent.
Do I Need a Lawyer to Form a Partnership in Georgia?
It’s important to know that it is perfectly legal and well within your rights to form a partnership with someone without working with an attorney at all. However, there are reasons why it is prudent to work with an experienced firm like Oliver Hughes LLC to assemble a valid partnership agreement.
The most critical of those reasons is the potential financial impact of a partnership. You should know that in a standard general partnership, the partners share joint authority but also share joint liability. That means that you are at least partially responsible legally and financially for the decisions made by the company you’re partnering with someone else to run.
That’s an enormous amount of responsibility and trust to place in another person, no matter how well you think you know them. That’s why a thorough and well-executed partnership agreement can establish guidelines so everyone knows what their responsibilities are and what rules they’ve agreed on. The company will benefit from the transparency.
If you’re ready to start your partnership, contact Oliver Hughes LLC at 770-230-1447 so we can help you build the valid partnership agreement that you, your partner, and your company need to succeed.
