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Starting a Small Business in Oakland County
Partnership Agreements
Business Organization
The following is a list of points to consider when planning a Partnership Agreement:
1. Name of partnership.
2. Duration of the partnership (number of years or "until dissolved").
3. Location of office.
4. Capital contribution of each partner.
5. Whether partners may make additional contributions.
6. The level at which Capital Accounts of the Partners must be maintained.
7. Participation of each partner in profits and losses.
8. Salaries, if any, to be paid to partners and whether or not these salaries are to be treated as expenses in determining distributable profits.
9. The amounts of any regular drawing against profits.
10. Duties, responsibilities and sphere of activities of each partner.
11. Amount of time to be contributed by each partner.
12. Prohibition of outside business activities by partners that would be in competition with the partnership business.
13. Who is to be the managing partner and whose decision will prevail in case of a tie or dispute?
14. Procedure for admitting new partners.
15. Methods of admitting junior partners, without capital, if such a procedure is to be considered desirable.
16. Method of determining the value of Goodwill in the business, in case of death, incompetence or withdrawal of a partner or dissolution of the partnership for any other reason.
17. Method of liquidating the interest of a deceased or retiring partner.
18. Age at which a partner must withdraw from active participation and arrangements for adjusting his salary and equity.
19. Whether or not surviving partners shall have the right to continue using the name of a deceased partner in the partnership name.
20. Period of time in which retiring or withdrawing partners may not engage in a competing business.
21. Basis for expulsion of a partner, method of notification of expulsions and the disposition of any losses that arise from the delinquency of such a partner.
22. How will the event of protracted disability of a partner be handled?
23. Whether accounts will be kept on a cash or accrual basis and methods of compensating partners who withdraw or retire.
24. The fiscal year of the partnership.
25. Whether interest will be paid on debit and credit balances in partners' accounts.
26. Where the partnership cash will be deposited and who will sign checks.
27. Whether all partners will have access to the account books.
28. Under what conditions limited partners will be accepted into the firm, and if so, who shall be designated as the general partner.
29. Prohibition of the partners pledging, selling, hypothecating, or in any manner, transferring their interest in the partnership except to other partners.
30. Identification of material contracts or agreements affecting the liability or operations of the partnership.
Reproduced with permission of the author of Complete Guide to Starting and Operating a Successful Business in Michigan. Published by Business Information Network, Box 11, Troy, Michigan, USA, 48099.
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