Why it is so important to have an experienced business attorney to draft or review your partnership contract agreement when starting a new business venture?
There is always a degree of excitement when you finally set sail into a business venture with another partner. A well-drafted business plan and a clear understanding between parties in a form of a written partnership agreement is key to reducing many pitfalls that often arise as a natural consequence of a multi-member ownership. Unfortunately, business partners often underestimate the value and importance of securing a well drafted partnership agreement prior to their voyage. Because these agreements need to be specifically tailored to the aspects of a particular business while conforming to the desire of the parties, they should be carefully drafted by a business attorney to ensure all the rights and interests of the respective partners are properly protected.
A partnership agreement is an enforceable binding agreement between members of a company. It details all the internal specific functions that are vital to operation of the business, while providing solutions in the event of conflict or uncertainty between the owners and respective parties. As stated by Section 620.1110(1) of Florida Statutes, "the partnership agreement governs relations among the partners and between the partners and the partnership." It should be noted that unless the partnership agreement provides otherwise, the laws of the governing jurisdiction will control the aforementioned relationships. Therefore, should a breach of a partnership agreement occur, a readily available and previously agreed upon method of resolution, carrying the weight of the law, will become essential.
According to F.S. 620.1404, all general partners of a limited partnership are held jointly and severally responsible for individual obligations arising out of their obligation to the limited partnership, unless agreed upon differently. While a judgment entered against a company cannot be satisfied from a general partner's assets, lawsuits typically join general partners to obtain a judgment against both parties. Similarly, absent personal liability, a judgment creditor may not levy the assets of a general partner to satisfy claims against the limited partnership. F.S. 620.1405.
One particular consequence arises when it become necessary to expel a partner from the company. In a general partnership, absent an agreement to the contrary, dissolution of the partnership business may be the only way to accomplish this result. This can become an issue when one partner diverts or misappropriates business capital or simply makes a bad investment, without the express permission of the other partners or acts in direct material breach of the business partnership agreement. In such situations, a partner or the partnership can bring an action for legal or equitable relief against the breaching partner to enforce a right under the agreement, including among others the right to expel the violating partner or simply compel dissolution of the company. (See F.S. 620.8405 detailing actions by partnership and partners). While the existence of a partnership agreement can help mitigate many of these concerns, the absence of the same can force remaining partners to confront costly litigation that is often associated with breach of contract laws of the applicable jurisdiction.
Examples of breach of authority discussed above, involve among many the execution or delivery of various commitments in the name of the partnership without adequate notice, the improper issuance of a bond, trust, deed, mortgage, indemnity or a guarantee to the same effect, wrongful dismissal of an employee, use of company property for private gain or for benefit of an unauthorized third party, failure to properly handle agreed upon expenses, voluntary or involuntary assignment of a partner's interest to an unknown person or spouse, failure to perform the work involved by taking sick leave or vacation time beyond what has been agreed upon, engaging in a conflicting business venture, and many other such considerations. (See F.S. 620.8204 and F.S. 620.8302, governing matters associated with transfer of partnership property.)
Another fertile ground of conflict arises when an obligated partner fails to make an initial and/or subsequent capital contribution(s). According to F.S. 620.1502(4), a partnership agreement of a limited partnership may provide various penalties against the interests of any breaching partners who fail to meet this obligation. For instance, assume each of four partners previously agreed to an obligation to make a subsequent contribution of $10,000 to a limited partnership, and one partner fails to make his or her portion. In the absence of a legal partnership agreement, may that partner's share be reduced up to the amount that would coincide with his or her total contribution to the partnership, i.e., 25%? What if that partner acts in bad faith? Unfortunately there is a trend to ignore these matters until conflict arises compromising the viability of the business. When parties underestimate the multitude of complexities detailed in well-crafted partnership agreement, including costly lawsuits responsible for downfall of millions of businesses worldwide, liability and failure are the inevitable consequence.
If your company has sensitive business transaction issues in Orlando, Tampa or anywhere in Central Florida, and needs a partnership agreement, we highly recommend that you obtain experienced legal counsel to ensure that your interests are properly protected. Our Central Florida business attorney can be reached by calling (407) 205-2330. You may also complete the online form located at the top of this page and our Orlando and Tampa business lawyer will contact you shortly. We have helped many businesses in the past navigate through this maze and would be honored to help you too! We value your privacy and will keep any information strictly confidential.
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