What to Look for in a Business Partnership Agreement

A well-drafted partnership agreement is the single most important document in any business partnership. Without one, disputes are governed by Florida's default statutory rules - which almost never align with what the partners actually intended.

Capital contributions and ownership percentages

The agreement should clearly define each partner's initial contribution (cash, property, services, or intellectual property) and the resulting ownership percentage. It should also address future capital calls - what happens when the business needs additional funding and one partner can't or won't contribute.

Profit and loss distribution

How are profits split? Is it proportional to ownership, or is there a different arrangement? What about losses? The agreement should specify when and how profits are distributed, and whether partners can take draws against future earnings.

Management and decision-making authority

Who makes day-to-day decisions? Which decisions require unanimous consent? Common triggers for unanimous consent include taking on debt above a threshold, entering major contracts, hiring key employees, and selling business assets. Without clear authority boundaries, partners end up in constant conflict.

Dispute resolution

Every partnership will face disagreements. The agreement should specify a resolution mechanism - mediation, arbitration, or litigation - before emotions run high. Many agreements include a "buy-sell" trigger for irreconcilable disputes, allowing one partner to buy out the other at a formula-determined price.

Exit provisions

How does a partner leave? Under what circumstances? The agreement should address voluntary withdrawal, retirement, disability, death, and termination for cause. For each scenario, define the buyout terms, payment schedule, and valuation method. Agreements that ignore exit provisions create the most contentious disputes.

Non-compete and confidentiality

Florida enforces reasonable non-compete agreements. The partnership agreement should address whether departing partners can compete with the business, solicit its customers, or hire its employees. Confidentiality provisions protect trade secrets and proprietary information.

The cost of not having an agreement

Without a written partnership agreement, Florida's Revised Uniform Partnership Act governs. Under these default rules, all partners share profits equally regardless of contribution, any partner can bind the partnership to contracts, and dissolution is triggered by any partner's withdrawal. These defaults rarely serve anyone's interests.

Having a Board Certified Business Litigation attorney draft or review your partnership agreement is a small investment compared to the cost of partnership litigation.

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