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Step 1
Purpose. State the purpose of the agreement. This should include the management and operation of the proposed business and how much time each partner is expected to contribute to the business.
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Step 2
Term. State the term of the agreement in years or until close of business.
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Step 3
Money. Detail the capital contribution of each partner, each interest in profit and loss, and distribution of profit. Define any salaries each will receive and ownership of property. Designate how revenues will be deposited and whether partners have individual authority to extend credit or borrow money. Define how, when and how much access a partner has to the books and audits.
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Step 4
Partnership Interest: Define the sell or transfer of a partner’s interest or rights. It is typical to include in this section, an allowance that all other partners shall have first purchase rights from the offering partner. Usually, the timeline to buy is detailed as well as the form of payment, when payment is due and course of action on defaulted payments to purchase. In addition, the agreement will define how appraised value will be determined.
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Step 5
Buy Sell. The document should include the partner’s option in the event of death, bankruptcy or retirement.
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Step 6
Other Provisions. Your agreement should have a provision for individual liens or judgments against a partner, definition of immediate family, provisions for life insurance and inclusion into a will or trust of partner’s representative.
