Business Lawyer NYC : Business Partnership Agreement

A comprehensive partnership agreement includes partner names and ownership percentages, capital contributions from each partner, and profit and loss allocation methods. The agreement should outline management responsibilities, decision-making procedures, and voting rights for major business decisions. Additionally, it must address what happens if a partner wants to exit, becomes incapacitated, or passes away. Other critical elements include dispute resolution mechanisms, amendment procedures, and provisions for bringing in new partners or dissolving the partnership.

New York Revised Limited Partnership Law and the New York General Partnership Law provide default rules when a partnership agreement is silent or incomplete. However, these default provisions may not align with your business goals or protect your specific interests. A business lawyer in NYC ensures your agreement complies with state law while addressing your unique circumstances. New York courts enforce partnership agreements according to their terms, so precise drafting is essential to avoid litigation over ambiguous language or conflicting interpretations.

Capital contributions can be cash, property, equipment, or intellectual property. Your agreement must specify the amount or value of each contribution, the timing of payment, and whether contributions are refundable upon exit or dissolution. Partners who contribute unequal amounts may negotiate different profit shares or management rights to reflect their investment level. Failing to document contributions clearly often leads to disputes when partners disagree about who invested what or when additional capital is needed.

New York law permits partners to allocate profits and losses in any manner they choose, regardless of their capital contribution percentage. Some partnerships distribute profits equally; others tie distributions to capital contributions, work hours, or management roles. Your agreement should specify whether distributions occur regularly or only upon dissolution, and whether retained earnings are reinvested or distributed. If your partnership involves a business loan agreement, profit distribution may be affected by debt service obligations, so coordination between financing documents is essential.

Your agreement should define which partners have day-to-day operational authority and which decisions require unanimous consent or majority approval. For example, hiring employees or purchasing routine supplies might require only one partner's authorization, while selling major assets or taking on significant debt requires all partners to agree. Some partnerships designate a managing partner who handles operations while other partners remain passive investors. A business lawyer in NYC ensures these authority levels are reasonable and do not expose the partnership to unnecessary risk or liability.

Even well-intentioned partnerships sometimes face deadlock when partners disagree on major decisions. Your agreement should include mechanisms to resolve disputes, such as mediation, arbitration, or a tie-breaking procedure. Some partnerships include a shotgun clause that allows one partner to propose a buyout price, forcing the other partner either to sell at that price or buy the first partner's stake at the same price. These provisions prevent disputes from paralyzing the business and provide a clear path forward when partners cannot agree.

A buy-sell agreement specifies how a departing partner's interest will be purchased and at what price. Common valuation methods include book value, fair market value determined by appraisal, or a formula based on revenue or earnings. Some agreements require remaining partners to purchase the departing partner's stake; others allow the partnership itself to redeem the stake. Your agreement should address funding mechanisms, such as life insurance proceeds or installment payments, to ensure the remaining partners can actually afford to buy out the departing partner.

Your partnership agreement should specify whether a deceased partner's heirs inherit the partnership interest or whether the remaining partners must purchase it. If a partner becomes disabled and cannot participate in management, your agreement should outline temporary or permanent succession procedures. Some partnerships include key person insurance to fund buyouts if a critical partner dies or becomes incapacitated. A business lawyer in NYC coordinates these provisions with your personal estate plan and ensures they comply with New York law regarding wills, trusts, and beneficiary designations. If your partnership requires management services, a business management agreement may complement your partnership agreement by clarifying operational responsibilities.