{"id":6682,"date":"2024-08-06T11:26:13","date_gmt":"2024-08-06T04:26:13","guid":{"rendered":"https:\/\/champ-lawfirm.com\/?p=6682"},"modified":"2024-09-30T09:33:07","modified_gmt":"2024-09-30T02:33:07","slug":"partnership-contract","status":"publish","type":"post","link":"https:\/\/champ-lawfirm.com\/en\/partnership-contract\/","title":{"rendered":"Partnership contract, should not be overlooked"},"content":{"rendered":"<p class=\"p1\"><span style=\"color: #333399;\">Do not ignore the Partnership agreement <\/span><\/p>\n<p class=\"p1\">Having a business partner is the first step in building a business. Usually, in the early stages, there are not many problems<\/p>\n<p class=\"p1\">because both parties view everything positively and trust each other.<\/p>\n<p class=\"p1\">However, as time goes by, regardless of whether your business is making a profit or incurring a loss, issues between partners begin to arise.<\/p>\n<p class=\"p1\">These issues can include unequal workloads despite equal benefit sharing, growing distrust, and forgetting initial agreements because no contract was made, among others.<\/p>\n<p class=\"p1\">Today, we would like to introduce you to the aspects of a partnership agreement that you should be aware of before starting a business.<\/p>\n<div class=\"is-divider divider clearfix\" ><\/div>\n<h1><span style=\"color: #333399;\">Table of content<\/span><\/h1>\n<ul>\n<li><a href=\"#1\">Are Verbal Agreements and Gentlemen&#8217;s Agreements Legally Binding?<\/a><\/li>\n<li><a href=\"#2\">How to do the partnership agreement?<\/a><\/li>\n<li><a href=\"#3\">What is an unregistered business agreement?<\/a><\/li>\n<li><a href=\"#4\">What should be in the partnership agreement?<\/a><\/li>\n<li><a href=\"#5\">General Partnership (Juristic Person)<\/a><\/li>\n<\/ul>\n<span class=\"scroll-to\" data-label=\"Scroll to: #1\" data-bullet=\"false\" data-link=\"#1\" data-title=\"Change this\"><a name=\"1\"><\/a><\/span>\n<div class=\"is-divider divider clearfix\" ><\/div>\n<h2><span style=\"color: #333399;\">Are Verbal Agreements and Gentlemen&#8217;s Agreements Legally Binding?<\/span><\/h2>\n<p>First, let\u2019s understand the concept of a <span style=\"color: #333399;\">\u201cpartnership agreement.\u201d<\/span> Many businesses start based on mutual trust without any formal agreements between partners or owners.<\/p>\n<p>Legally, this is not prohibited. Our laws do not intend to complicate the process of starting a business; therefore, there are no mandatory requirements for partners to formalize their agreements in writing.<\/p>\n<p>Thus, even <span style=\"color: #333399;\">\u201cgentlemen\u2019s agreements\u201d<\/span> or <span style=\"color: #333399;\">\u201cverbal agreements\u201d<\/span> can be legally enforced.<\/p>\n<p>However, based on our experience, when disputes arise, even before going to court, one party often \u201cforgets\u201d what was agreed upon or discussed, taking advantage of the lack of a written agreement.<\/p>\n<p>This can lead to one party saying whatever they want.<\/p>\n<p>The absence of a written contract poses a significant risk at the partnership level.<\/p>\n<span class=\"scroll-to\" data-label=\"Scroll to: #2\" data-bullet=\"false\" data-link=\"#2\" data-title=\"Change this\"><a name=\"2\"><\/a><\/span>\n<div class=\"is-divider divider clearfix\" ><\/div>\n<h2><span style=\"color: #333399;\">How to do the partnership agreement?<\/span><\/h2>\n<p>A partnership agreement is a type of contract that the law does not require to be registered publicly.<\/p>\n<p>Therefore, each partner can create and keep the agreement privately without needing to register it with the Department of Business Development or any other governmental agency.<\/p>\n<p>However, if you are planning to create a partnership agreement, it is advisable to seek the help of someone experienced in drafting such agreements or a lawyer specializing in this field.<\/p>\n<p>This ensures that the rules and provisions in the partnership agreement are well-defined and beneficial.<\/p>\n<p>A partnership agreement is not just a record of investment or business operations; it should also serve as a guideline for resolving various situations that may arise.<\/p>\n<p>When issues occur, partners can refer to the agreement to address and resolve those problems based on the initial terms agreed upon.<\/p>\n<span class=\"scroll-to\" data-label=\"Scroll to: #3\" data-bullet=\"false\" data-link=\"#3\" data-title=\"Change this\"><a name=\"3\"><\/a><\/span>\n<div class=\"is-divider divider clearfix\" ><\/div>\n<h2><span style=\"color: #333399;\">What is an unregistered business agreement?<\/span><\/h2>\n<p>Unregistered partnerships are among the most problematic business arrangements.<\/p>\n<p>Without regulatory guidelines or formal registration requirements, these partnerships often rely on verbal agreements, lacking the formal documentation necessary for legal proceedings.<\/p>\n<p>This informality can lead to disputes, especially when business dealings are with close associates, making it difficult to distinguish between serious conversations and casual remarks.<\/p>\n<p>As a result, the practice of creating &#8220;unregistered partnership agreements&#8221; is becoming more popular to mitigate these issues.<\/p>\n<p>Examples of unregistered partnership businesses include pooling money with friends to sell clothes online, setting up a market stall, or opening a BBQ restaurant with friends.<\/p>\n<p>Certain businesses benefit from the flexibility and cost savings of not registering as a limited partnership or legal entity, especially in the early stages.<\/p>\n<p>However, it is crucial to at least have a partnership agreement in place. This recommendation is to ensure that:<\/p>\n<p>The roles and responsibilities of each partner are clearly defined.<br \/>\nThere is a written record of the terms agreed upon, which can be referenced if disputes arise.<\/p>\n<p>Legal protection is provided to all parties involved.<br \/>\nWhether the business succeeds or fails, challenges are inevitable.<\/p>\n<p>Having a written partnership agreement can help navigate these challenges more smoothly.<\/p>\n<p>&#8220;Because whether the business thrives or not, problems are bound to arise.&#8221;<\/p>\n<span class=\"scroll-to\" data-label=\"Scroll to: #4\" data-bullet=\"false\" data-link=\"#4\" data-title=\"Change this\"><a name=\"4\"><\/a><\/span>\n<div class=\"is-divider divider clearfix\" ><\/div>\n<h2><span style=\"color: #333399;\">What should be in the partnership agreement?<\/span><\/h2>\n<p>The law does not prescribe a specific format for partnership agreements, but there are essential points that should always be agreed upon:<\/p>\n<ul>\n<li><span style=\"color: #333399;\">All Partners Should Sign the Agreement<br \/>\n<\/span>Every partner must enter into and sign the agreement.<\/li>\n<li><span style=\"color: #333399;\">Investment Amount and Share Proportion<br \/>\n<\/span>Clearly define the amount of investment and the proportion of shares for each partner.<\/li>\n<li><span style=\"color: #333399;\">Management Authority and Organizational Changes<br \/>\n<\/span>Specify the management authority and the power to change the organizational structure.For instance, any expenditure exceeding a certain amount must be approved by all partners.<\/li>\n<li><span style=\"color: #333399;\">Salaries, Income, Dividends, and Benefits<br \/>\n<\/span>Outline the distribution of salaries, income, dividends, and other benefits.<\/li>\n<li><span style=\"color: #333399;\">Breach of Contract<\/span><br \/>\nEstablish the consequences and procedures if any partner breaches the agreement.<\/li>\n<li><span style=\"color: #333399;\">Termination of Agreement<\/span><br \/>\nDefine the conditions for terminating the agreement, the effects of termination, and the terms for buying back ownership from other partners.<\/li>\n<li><span style=\"color: #333399;\">Force Majeure<\/span><br \/>\nInclude a clause to address unforeseen circumstances that might affect the partnership. Etc.<\/li>\n<\/ul>\n<p>These points help ensure that all partners have a clear understanding of their roles, responsibilities,<\/p>\n<p>and the terms of their partnership, reducing the risk of disputes and misunderstandings.<\/p>\n\t<div class=\"img has-hover x md-x lg-x y md-y lg-y\" id=\"image_1686006435\">\n\t\t<a class=\"\" href=\"https:\/\/lin.ee\/GjMuz8U\" target=\"_blank\" rel=\"noopener\">\t\t\t\t\t\t<div class=\"img-inner dark\" >\n\t\t\t<img decoding=\"async\" width=\"1000\" height=\"300\" src=\"https:\/\/champ-lawfirm.com\/wp-content\/uploads\/2022\/06\/lawfirm-ads-2.png\" class=\"attachment-original size-original\" alt=\"champ lawyer and associates\" srcset=\"https:\/\/champ-lawfirm.com\/wp-content\/uploads\/2022\/06\/lawfirm-ads-2.png 1000w, https:\/\/champ-lawfirm.com\/wp-content\/uploads\/2022\/06\/lawfirm-ads-2-600x180.png 600w, https:\/\/champ-lawfirm.com\/wp-content\/uploads\/2022\/06\/lawfirm-ads-2-768x230.png 768w\" sizes=\"(max-width: 1000px) 100vw, 1000px\" \/>\t\t\t\t\t\t\n\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/a>\t\t\n<style>\n#image_1686006435 {\n  width: 100%;\n}\n<\/style>\n\t<\/div>\n\t\n<span class=\"scroll-to\" data-label=\"Scroll to: #5\" data-bullet=\"false\" data-link=\"#5\" data-title=\"Change this\"><a name=\"5\"><\/a><\/span>\n<div class=\"is-divider divider clearfix\" ><\/div>\n<h2><span style=\"color: #333399;\">General Partnership (Juristic Person)<\/span><\/h2>\n<p>Understanding the importance of having a partnership agreement is crucial.<\/p>\n<p>Many people tend to focus only on unregistered businesses and might think that businesses registered as juristic persons (which are legally required to register) do not need a partnership agreement.<\/p>\n<p>This is a misconception.<\/p>\n<p>The government requires registration only for essential details needed by those who may contact the business, such as who has decision-making authority and the types of shares held by each partner.<\/p>\n<p>However, it does not specify the terms and conditions between the partners themselves.<\/p>\n<p>While the law outlines several duties and rights among partners, many partners are unaware of these provisions, and they may not be suitable for every business.<\/p>\n<p>Therefore, even for registered general partnerships or other types of juristic entities, having a partnership agreement is still necessary.<\/p>\n<p>As a lawyer who has handled many partnership disputes, I strongly recommend that every business should have a partnership agreement in place.<\/p>\n<p>Disputes with external parties, customers, or even employees often do not affect the future of the business as much as disputes between partners.<\/p>\n<p>Such internal conflicts usually do not end well.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Having a business partner is the first step in building a business. Usually, in the early stages, there are not many problems<\/p>\n","protected":false},"author":5,"featured_media":6692,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[86,80],"tags":[],"class_list":["post-6682","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-law","category-court-2"],"_links":{"self":[{"href":"https:\/\/champ-lawfirm.com\/en\/wp-json\/wp\/v2\/posts\/6682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/champ-lawfirm.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/champ-lawfirm.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/champ-lawfirm.com\/en\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/champ-lawfirm.com\/en\/wp-json\/wp\/v2\/comments?post=6682"}],"version-history":[{"count":0,"href":"https:\/\/champ-lawfirm.com\/en\/wp-json\/wp\/v2\/posts\/6682\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/champ-lawfirm.com\/en\/wp-json\/wp\/v2\/media\/6692"}],"wp:attachment":[{"href":"https:\/\/champ-lawfirm.com\/en\/wp-json\/wp\/v2\/media?parent=6682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/champ-lawfirm.com\/en\/wp-json\/wp\/v2\/categories?post=6682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/champ-lawfirm.com\/en\/wp-json\/wp\/v2\/tags?post=6682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}