A partnership agreement is very essential for a partnership business. Sound business practice dictates that a partnership agreement must be written and signed, although that is not a legal requirement.
Such a contractual agreement is called articles of partnership. Written articles of partnership can prevent or lessen misunderstanding at a later time.
The form that each partner can also have the idea of his rights and obligations and the terms and conditions can be fulfilled in the best interest of all.
Sometimes the agreement is not written. Oral partnership, though legal, increases the possibilities of misunderstandings.
Importance of partnership agreement
1. Avoid conflict: It is not necessary that all the time partners will be agreed on one with another. Sometimes there may happen conflict we can avoid this conflict if we have a partnership agreement. So, a partnership agreement is really very important for a partnership business.
2. Written document: As a written document legally a partnership agreement plays a vital role.
3. Legal power: It ensures the legal power of every partner of the partnership business.
4. Ensure benefit: If you mention your portion of benefit in the partnership agreement it will ensure your benefit.
5. Protect Ownership: You can protect your ownership in business if you have a partnership agreement.
6. Better control: A detailed agreement must mention the controlling procedure of business. So, a partnership agreement creates a possibility of better control.
7. Ensure partner’s liability: A partnership business endure partners liability so that a business can run smoothly.
8. Dissolution of partnership: A partnership agreement has great importance when a partnership business breakdown.
Other Content of Partnership Business:
- What is a Partnership Business?
- Elements of Partnership Business
- Different Types of Partnership Business
- Features / Characteristics of Partnership Business
- Contents of Partnership Agreement
- Advantages and Disadvantages of Partnership Business
- Different Kinds of Partners
- Registration of Partnership Business
- Consequences / Effects of Partnership Registration
- Dissolution of Partnership Business