Many small business owners in Georgia operate as partnerships. This business model has many advantages, but it works best when the partners have a solid plan and an understanding of the legal basics.
Having a detailed, specific partnership agreement can give you more control over how your business will operate. When an agreement does not address a particular issue, Georgia’s general partnership laws will likely decide the outcome. However, the relevant provisions may not necessarily account for the particularities of your situation and your business’s goals.
Why you need an agreement
Coming up with a partnership agreement that serves your business’s needs and reflects your and your partner’s intentions can cut down on future disputes and help your company run smoothly.
Partners in a business may have various ways of contributing. Consider responsibilities for capital, day-to-day operations and goal-setting. Do the partners split these responsibilities equally or will each have a particular area of expertise? What happens if the initial investments do not suffice and the business needs further contributions down the road? Figuring out these things in advance can help avoid scrambling for solutions in the middle of an emergency.
Profit and loss sharing
Your agreement should also outline the ways in which the company’s profits and losses will be shared among the partners. Remember to discuss both relative shares and the mechanisms of distribution.
While a partnership does not have to go through the many formalities a corporation would, it is good to have an outline of processes for decision-making in various scenarios. In addition, an outline of each partner’s general, day-to-day functions is important as well.
Partner arrivals and departures
You should also address what happens if a partner dies or wants to leave the partnership. While you may not necessarily want to contemplate these eventualities right now, thinking them through in advance can help you avoid disruptions to your business later.
Conversely, in the future you may want to expand your operations and bring in new partners. Your agreement should delineate how this should proceed.