Advise Whether The Partnership Agreement Is Valid If It Is Not In Writing

In the absence of a written agreement, partnerships end when a partner makes known their explicit desire to leave the partnership. If you don`t want your partnership to end so easily, you can have a written agreement that describes the process by which the partnership dissolves. The partnership may, for example, dissolve in the event of a particular event or put in place a mechanism to continue the partnership if the remaining partners agree. If two parties have agreed on a partnership and one party refuses to respect the agreement, the court will not force that person to comply with the agreement, but the other party would have an action for damages against the opponent [Note12]. The only condition is that, without a written agreement, the partners do not receive a salary and share both profits and losses. Partners have a duty of loyalty to other partners and should not be enriched at the expense of partnership. Partners are also required to make financial accounting available to other partners. If this is not the desired outcome, it should be explicitly foreseen that the partnership will continue after the death of a partner with respect to the remaining partners. The result of dissolution is that the transaction must be settled, the assets of the partnership must be realized, its debts must be paid and any surpluses must be returned to the partners. Instead, it may be more appropriate for the company to include provisions for an orderly retirement of an individual partner by giving reasonable notice to other partners. The purpose of a partnership agreement is to protect the owner`s investment in the business, regulate the way the business is managed, clearly define the rights and obligations of partners and define the rules of cooperation in the event of disagreement between the parties. A well-written partnership agreement will reduce the risk of misunderstandings and disputes between owners.

While a partnership agreement is generally better than not having one, not everyone is perfect. Get a lawyer to help you design the best partnership agreement possible.