Partnership Agreements
Going into business with another person requires more than a shared idea.
Strategic Tax & Business Solutions can help you assess the financial and tax considerations involved in your partnership arrangements and provide the information nee
Creating a Strong Partnership Structure
Business partners may contribute different amounts of capital, bring different skills to the company, or have different expectations for its future. Establishing agreed terms from the outset can help prevent uncertainty when those differences arise.
A partnership agreement provides a framework for addressing ownership, contributions, profits, responsibilities, and changes within the business. The right arrangements can also make it easier to manage significant events such as the departure of a partner or the addition of a new one.
Partnership Agreement Considerations
Ownership & Contributions
Establish how each partner’s financial contribution and interest in the business will be recognized.
Profit & Loss Allocation
Determine how business income, expenses, profits, and losses will be allocated between the partners.
Partner Compensation
Consider how partners will be compensated for their involvement and how drawings or other payments will be handled.
Roles & Responsibilities
Define the areas of responsibility assigned to each partner and establish expectations for their involvement in the business.
New Partners
Consider the financial and ownership implications of admitting another individual into the partnership.
Partner Departures
Establish a process for situations where a partner retires, withdraws, or otherwise leaves the business.
Valuation & Buyouts
Determine how a departing partner’s interest may be valued and how a potential buyout could be funded and structured.
Who May Benefit From a Partnership Agreement?
- Professionals operating a practice together
- Entrepreneurs starting a business with a partner
- Family members running a business together
- Existing partnerships reviewing their current arrangements
- Partners with different levels of financial investment
- Businesses preparing for the possible retirement of a partner
- Partnerships considering bringing in additional owners
Understanding the Numbers Behind Your Agreement
The financial terms of a partnership agreement can have a lasting impact on each owner’s position. Contributions, profit allocations, partner compensation, asset ownership, and buyout provisions all need to be considered carefully.
Strategic Tax & Business Solutions can provide accounting and tax insight into these areas, helping you understand the financial information behind your partnership arrangements and identify matters that may require further professional advice.
Build Your Partnership on Clear Terms
A well-defined partnership can provide direction when the business is growing, responsibilities are changing, or an owner is preparing to move on. Establishing the financial framework early can help partners address important questions before they become difficult issues.
Contact Strategic Tax & Business Solutions to discuss the accounting and tax considerations relevant to your partnership agreement.