Entering into a partnership agreement can be a relatively simple and beneficial way for two or more people to enter business together. Working with an attorney to create a thorough, legally enforceable partnership agreement can help you protect your rights and interests. Partnership agreements are written contracts allowing parties to understand their rights and obligations.
The Virginia business law attorneys at Surovell Isaacs & Levy PLC are prepared to help you create a partnership agreement that meets your business’s unique needs and goals. We will work with you to ensure you understand the terms of the partnership agreement. Should a dispute over the partnership agreement arise, we are prepared to help you resolve the dispute or pursue enforcement of your rights in Virginia courts.
The Requirements of a Partnership Agreement Under Virginia Law
In a partnership agreement, two business partners share liabilities and profits for their business. Each partner has the right to act on behalf of the partnership when negotiating, forming contracts with, and otherwise dealing with third parties.
The Code of Virginia §50-73.102 states that the members of a partnership owe the other partners a duty of loyalty and to follow the law, deal with a general sense of good faith, and provide an accurate accounting of the assets and liabilities of the partnership.
The partnership agreement must create mutual, reciprocal duties between all partners. Finally, the partnership agreement cannot restrict one or more partners’ access to financial documents or remove a partner’s right to expect fair dealing from the other partners. Partners are required to apply for the appropriate licenses and permits with the Virginia State Corporation Commission. Generally, partners are responsible for the actions of the other partners if lawsuits or debts arise.
Virginia Limited Liability Partnerships (LLPs)
The Virginia Uniform Partnership Act allows owners to register their partnership as a limited liability partnership. The main benefit of registering as an LLP is the legal protection from partners being required to pay that’s accrued by the company personally.
Registering as a limited liability partnership can also protect individual partners should the partnership face lawsuits. If you are considering creating a partnership agreement, speaking to an attorney about whether a limited liability partnership could help protect your personal resources is beneficial.
The Benefits of Creating a Partnership Agreement
While Virginia law does not require partnership agreements to be in writing to be enforceable, creating a written partnership agreement is necessary to protect yourself. Verbal agreements between partners can lead to significant misunderstandings later on. People’s memories can fade, so having all of the details of your partnership arrangement in a written partnership agreement will be critical should disputes arise.
Negotiating the partnership agreement can also help you and your partner or partners establish the specific duties each of you will be required to perform. Working together to create a thorough partnership agreement may avoid many potential conflicts. Even if you assume that you and your partners are seeing eye to eye on all the important aspects of your business, you would be surprised at how easily disputes can arise.
Writing down all of the important aspects of your partnership will help all the partners enter the business with a clear understanding of how it will operate on a day-to-day basis and what their roles are. Additionally, when partners are unclear of their rights and duties as partners, disputes can arise between them and negatively affect the personal and business relationships within the business.
What To Include in a Partnership Agreement
A partnership agreement should outline the specific responsibilities and duties of all parties. The agreement should also clearly spell out how the company’s profits will be distributed to the partners. Partnership agreements should also include each partner’s percentage of ownership of the company. Some partners may contribute more work to the partnership to get it started. They may be entitled to a larger percentage of ownership of the company. Other partners may give the company more capital and require a larger ownership percentage.
The partnership should also clearly explain how potential new partners should be admitted and how a partner’s exit will be handled. The partnership agreement should also explain pass-through tax benefits that are common to partnerships. They should describe how the partners are shielded from liability. The Virginia Partnership Attorneys at Surovell Isaacs & Levy PLC Will work with you to review your needs and goals and draft a partnership agreement tailored to your unique needs. If you would like to negotiate an existing partnership agreement, our attorneys are prepared to do so in a thoughtful and persuasive manner.
The Benefits of Working with a Partnership Agreement Attorney
Virginia law concerning partnership agreements is complex. If your partnership agreement includes actions that are invalid under the Virginia Uniform Partnership Act, you could face legal challenges down the road. For example, the partnership agreement cannot obliterate the partner’s duty to engage in good faith and fair dealing.
However, it can set reasonable standards for the partners when it comes to dealing with other partners. The agreement can’t change how a court may choose to expel a partner or how Partners can wind up the business if doing so violates Virginia law. Working with an attorney can help you ensure that your contract agreement meets all of the vast requirements under Virginia law.
Discuss Your Partnership Agreement with a Skilled Attorney in Northern Virginia
Whether you are an entrepreneur interested in starting a company with a partner or have an existing partnership, working with an attorney to create a partnership agreement can be beneficial. Taking the time to adopt a partnership agreement in writing can prevent future misunderstandings by addressing issues beforehand.
At Surovell Isaacs & Levy PLC, our business attorneys are prepared to help you create the formation documents you need, including partnership agreements. Whether you need to create a partnership agreement or negotiate an existing agreement, don’t hesitate to contact Surovell Isaacs & Levy PLC to learn how we can protect your rights.