Partnerships are a strategic tool for growth and innovation in any business setting. However, the ability of any business to thrive could be impacted by the clarity (or lack thereof) of the partnership agreement. A fully developed partnership agreement is the linchpin for building a solid foundation to sustain a successful long-term relationship between partners and individuals looking to partner with the company.
What Is A Partnership Agreement?
A partnership agreement is a legally enforceable contract that describes the relationship and various rules to follow by companies or individuals who are business partners. Partnership agreements essentially explain each partner's rights and duties. It also sets the policies for managing the company, dealing with conflicts, and making decisions. Without a clear agreement, alliances can be derailed through misunderstandings.
A long-term partnership has to be established if the client is serious about getting into it. First of all, an agreement should define the responsibilities of each party. First, this means stating what each partner brings to bear: for example, financial contribution on one hand and operational or intellectual capital on another. Role definition, in this case, serves as a protection mechanism to ensure everyone knows the role they play, and this includes the expectations formed around one another that can help you steer clear of conflicts.
Decision Making
Another key characteristic of a strong partnership agreement is setting up an effective decision-making practice. The agreement should also reflect the way decisions will be made—unanimous consent or a majority vote, for instance. It should also mention the policies to resolve conflict and clauses allowing mediation or arbitration if necessary.
Allocation of Dividends and the Future of the Partnership
In addition, a partnership agreement may address financial concerns while establishing an agreement between two or more parties. The partners may decide how to divide profits and losses in the contract and establish a framework for handling company monies. You should also consider how the partnership can and will be dissolved if one partner decides to leave, how a new partner can be added, etc.
Protection of Intellectual Property
Another essential part of a partnership agreement is protecting intellectual property (“IP”) and confidential information. Protecting trade secrets and IP is a top priority for contemporary businesses since today's market competition can be fierce and information is widely accessible. The agreement should have provisions protecting the partnership's IP and prohibitions against unlawful disclosure of confidential information.
Flexibility
Finally, the partnership should be flexible enough to make changes occasionally. The terms included in the initial agreement must be reviewed frequently and modified as needed.
Conclusion
Protecting your business and ensuring the longevity of a partnership comes down to having a solid partnership agreement in place. A clear, robust agreement provides the stability and direction you need to build — and maintain – a successful business relationship by clearly allocating responsibilities, defining decision-making processes, and dealing with financial issues. The longevity of your partnership over the long term hinges heavily on you taking the time and making an effort to produce a comprehensive but also adaptable agreement.
Please contact Serna Legal Services at 312-601-9859 or info@sernalegalservices.com if you’d like to learn more about protecting your business's trade secrets. If you’re ready to protect your trade secrets, we can work with you to help you protect your valuable intellectual property!
This content is published by Serna Legal Services, LLC and is available for informational purposes only and is not considered legal advice on any subject matter. By viewing this content, the reader understands there is no attorney-client relationship between the reader and the publisher. The content should not be used as a substitute for legal advice from a licensed professional attorney, and readers are urged to consult their own legal counsel on any specific legal questions concerning a specific situation
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