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Principal Components of Partnership agreement

August 7, 2009

There are many parts that should be included in any agreement of partnership. These are,

* Names of included parties – includes all names of people participating in this contract.

* Commencement of partnership- includes when the partnership should begin. The date of the contract is assumed as this date.

* Duration of partnership – includes how long the partnership should last. It is automatically assumed that the death of one of the contracting parties breaks the contract, unless otherwise stated.

* Business to be done – includes exactly what will be done in this partnership. This section should be very particular to avoid confusion and loopholes.

* Name of firm – includes the name of the business entity.

* Initial investments – includes how much each partner will invest immediately or by installments.

* Division of profits and losses – includes what percentages of profits and losses each partner will receive. If it is not a limited partnership, then there is unlimited liability.

* Ending of the business – includes what happens when the business winds down.

Usually this includes three parts:

1) All assets are turned into cash and divided among the members in a certain proportion

2) One partner may purchase the others’ shares at their value

3) All property is divided among the members in their proper proportions.
* Date of writing – includes simply the date that the contract was written.

Common Components of Partnership agreement:

There are also multiple sections which are often included as well in agreement of partnership, based on the circumstance. These are,

* Leadership – includes the granting of one partner the rights to manage and administer the business or a specific department.

* Majority management – includes the authorization of a majority of partners to manage the affairs of the entire partnership. This is particularly common where there are numerous partners.

* Annual account – includes provisions to account for, annually, the property and debts of the business.

* Consistent interest – includes the forbidding of any partner to carry out business unrelated to the partnership. This is usually implied in articles of partnership.

* Misconduct expulsion – includes the allowance of expelling partners who commit gross misconduct or becomes insolvent, bankrupt, etc. This is particularly common where there are numerous partners.

* Resolution of dispute – includes the submission of arguments to arbitration.

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