When partnerships are being negotiated and everyone is eager to work with each other, few people keep in mind how easy it is for workplace differences to develop. Yet they always do at some point, even if they rarely rise above minor skirmishes.
In order to fully protect each partner's rights and to clearly spell out each person’s specific obligations, you really should draft a partnership agreement. There are precise topics that can be included in such agreements that will help everyone stay focused on their daily projects -- with only minimal interruption due to management issues and obligations.
Here are some topics you should make sure are comprehensively addressed in your Georgia partnership plan.
Make Sure You Cover All of the Basic Topics
- The most advantageous funding of the partnership. Even if everyone has insisted on providing an equal amount of money to fund the business, be sure you carefully state the exact amount each partner has contributed in the agreement;
- Provide the identity of the managing partner. In addition to naming this person, clearly list in an explanatory manner all of the administrative duties this person has agreed to handle. If possible, try to include the names of one or two partners who are willing to “step in” to handle certain positions during the first year or two – should any partner leave, become seriously ill, or pass away. (This need will be contingent upon the specific Georgia laws that address what must happen when any partner leaves or joins the firm);
- Clearly describe each partner’s voting rights. Also, if these are based solely upon the funding provided by each partner, be sure to stay this fact in the partnership agreement;
- Provide information about all required meetings. Indicate how often most or all of the partners must meet together (usually, at least once a month) -- to discuss current earnings, outstanding debts, and new business contracts that may need to be ratified or rejected;
- Clearly indicate how much any one partner can “draw” from the partnership funds (and how long they have to repay all such funds) while waiting to receive payment for recent services rendered (or settlement checks if the partnership is a law firm);
- Set forth clear standards for deciding how many new partners can join the firm during any one year and what each person must bring with them – in terms of financial contributions to the firm’s operating account and major clients. Also, be sure to agree how many associates and other levels of employees can be hired during the coming year (while acknowledging that there may be a need to obtain extra outside help at times through various temporary employment agencies);
- Indicate how the partnership should handle any future dissolution, clearly setting forth the precise steps that must be followed;
- Provide information about how the partnership should resolve protracted differences. Indicate whether outside mediation or some other type of help should be obtained;
- Clearly describe when dissolution may be required by law. As already briefly referenced above, note whether the partnership must enter dissolution upon the death or departure of any partner—or the arrival and acceptance of a new one;
- Specifically indicate how each partner's share of the profits may change in light of certain new business or unexpected profits.
Always give serious though to consulting with outside counsel to be sure you've drawn up a completely fair and thorough partnership agreement. In addition, every partner will probably benefit if you have a tax expert review the entire agreement before everyone signs it.
To obtain help with handling all of your Georgia business planning needs, please contact Shane Smith Law today. You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (770) 487-8999.