Join or Leave a Partnership
How Can L4SB Help with Joining or Leaving a Partnership?
Partnerships are important and expensive. You need to make sure you do things right, otherwise you create significant risks for yourself.
Usually, most people find L4SB with closing documents in hand, and are looking for an attorney to “quickly review” their closing documents — whether they are buying into, forming or leaving a business entity with other partners. Our Join or Leave a Partnership offering was created for that individual — with closing documents in hand. We will conduct a 1-pass review and edit of the closing documents, and help improve those closing documents by addressing the following issues:
- Errors, typos and grammar problems
- Proper parties to the deal
- Structural and logical problems
- Legal risks and problems
- Perceived financial and business risks
- Negotiating opportunities
- Proper documentation of assets and liabilities
- Proper handling and disposition of business assets and liabilities
For many people, a partnership may represent the single greatest asset in their holdings. A partnership is serious business, and you need seriously experienced attorneys to make sure you’re not missing anything.
Partnerships are any type of business, where you have co-owners. It’s important to write down and document the partners’ expectation in a partnership.
New Partnership. New partners forming new partnership are filled with dreams, hopes and aspirations, the emotions of which often keep the partners from discussing and negotiating difficult items up-front, while the relationships are great. New partnerships should discuss big partnership issues before potential hard-feelings set in because the partners’ expectations differ from one another. Whether forming a true “partnership,” a LLC, C-Corporation or S-Corporation, all the other business owners are partners, and should think of the new business as a partnership. As a partnership, the right documentation should be created, so that all the partners know, understand and agree to the terms and expectations of the other partners — and to deal with unforeseen circumstance in a preplanned and prearranged manner.
For new partnerships, our “Join or Leave a Partnership” offering is probably not the right product — unless the corporate entity and related partnership documents have already been created. Otherwise, L4SB offers competitive corporate formation services, and can help create the right documents to kick-off and form a partnership. Please contact us, or read more about L4SB’s Corporate Related Service Offerings.
Existing Partnership. When an individual is invited to “join the partnership, he or she should be congratulated, but should also be careful. The stakes are high. Aside from potentially needing to buy into the partnership, a new partner inherits the debts and outstanding liabilities and obligations (including tax debts, threatened litigation, etc). All the existing partners have signed the partnership documents, and will put tremendous pressure on the new partner to “just sign.” However, new partners should enter a partnership carefully, and fully understand the costs, risks and outstanding issues. Furthermore, they should at least understand what happens upon termination of the partnership, leaving the partnership, or if he or she should become deceased. These issues can oftentimes be negotiated, and if they cannot, at least one knows the issues before committing oneself.
Don’t just “walk away” from a partnership. Make sure you have a separation agreement, and your name has been removed from everything.
Leaving or Dissolving a Partnership. When leaving a partnership or dissolving a partnership, significant issues abound, and without proper handling of the “separation,” a partner who thought they long left a partnership could end up becoming jointly and severally liable for that partnerships debts and outstanding obligations. There is much to do when leaving a partnership, much to negotiate, and much to take care of, including but not limited to negotiating a separation agreement, perhaps a promissory note if some payment schedule is put in place, and properly dealing with all the outstanding accounts, vendors, contracts and other arrangements that may continue to bind a departing partner.
- Real Attorneys, not Scriveners
- Significant Experience with Complex Business Transactions
- Exclusively Focused on the Needs of Business
- Flexible Hours, and Willing to Burn the Midnight Oil to Get the Job Done
- What sorts of documents are required to form a partnership?
In general, there are two types of documents: company formation documents and a partnership agreement of some sort. At the simplest level, if you form a limited liability company (LLC), the LLC requires an Operating Agreement and that Operating Agreement can also serve as a de facto partnership agreement. Things get a bit more complex for a C-Corporation or S-Corporation, where a separate partnership agreement is usually required in conjunction to the Bylaws. Things get even more complex still, if you add in investors, special situations, real property and/or complex forms of ownership or assets.
- Will I save money by downloading forms off the Internet?
It may seem self-serving to say this, but all attorneys who do this sort of thing have their own template documents from which to begin. If you download a form off the Internet, it’s almost a certainty that form will not come close to meeting your needs, and likely the form you download will actually be harmful or detrimental to your interests. If you hand that to an attorney to start with, the attorney isn’t sure which clause is important to you and which isn’t. He or she will end up having to understand your particular needs, expectations and concerns, and then try and edit someone else’s document to achieve what you want. In the end, you will save money simply by working directly with an attorney or a law firm, such as L4SB.
- Why is this $50/page, but your flat-rate contract review only $25/page?
Creating, joining or dissolving a partnership is complex. All business transactions are complex. They take significant time and represent a high degree of risk for both the attorney and the client. If we receive a business transaction related contract in our flat-rate contract review program, we would kick it over to our business transactions group, and the rate would increase from $25/page to $50/page.
- Do I really need a 'Separation Agreement' to dissolve a partnership?
You really do. It is the only conclusive proof you have, that the partnership was terminated and it would give you rights to pursue a cause of action against your former partners if the terms of that separation agreement are violated. It also forces you and your partners to sit down, negotiate and write down your terms; which greatly simplifies things if something bad happens later, such as bankruptcy of the company, some debtor comes knocking on your door, etc. Please be aware that simply signing a settlement agreement does NOT prevent the credit card companies, landlords and other lien or note holders from knocking on your door, if you previous agreed to be a personal guarantee. Those groups will not let you off the hook so easily. You will also need to negotiate with them, or force the company to close those accounts and re-establish new accounts that don’t have your name associated with the company.