Establishing a partnership can be a straightforward way to start a business, which can be especially beneficial if you want to share operational responsibilities with someone else. Still, these setups can be prone to legal disputes. If a party fails to fulfill their end of the arrangement, it can be a breach of contract, but the extent of legal action you can take may depend on your partnership agreement.
What makes it valid?
This document can help protect you and your business partner by setting clear terms and conditions to protect the interests of all parties. Sometimes, an oral agreement is enough, but formal written counterparts can be more functional.
Aside from protection, this contract can also establish rights, responsibilities and financial procedures involving the partnership. It can also contain predetermined direction in unpredictable situations, such as when a partner dies, withdraws from the arrangement or becomes unable to fulfill their duties.
These agreements can be valid if they exist between at least two people and indicate personal liabilities. In some cases, state law can enforce additional requirements to make these documents legally enforceable. In any scenario, you and your business partner should ensure your agreement is binding. If not, you can lose your ability to take legal action against breaches.
Understanding your partnership agreement before addressing legal issues
It can benefit you and your business partner to formally draft a partnership agreement before implementing the arrangement. At this stage, seeking legal counsel can also be helpful to maintain the legal soundness of your setup, no matter how complex your business operations become.
While an effective agreement does not guarantee the prevention of legal issues in the future, it can help you understand how to appropriately address contract disputes or breaches later when they happen.