Hawaii Partnership Agreements
Partnership agreements help frame your business’ operations and can help you and your partners avoid conflict. At DeVries & Associates, we help businesses negotiate, draft, and enforce well-written partnership agreements. Below, we explain our comprehensive approach to partnership law.
What Are Partnership Agreements?
A partnership agreement is a contract between two or more people who joined as partners in a business. It outlines the terms, conditions, and procedures that the partnership will use and helps dictate the business’ operations. Typically, a partnership agreement will include information about:
- Your business’ purpose
- The capital each partner contributed to the business
- Each partner’s rights and responsibilities
While partnership agreements can be oral, it’s always in your best interests to create a binding, written document that clearly outlines your business relationship.
Important Business Considerations in Partnership Agreements
Partnerships are a vital part of the Hawaiian economy. While most people associate partnership with relatively small businesses, they can grow to be robust and complicated entities. Without a clear and enforceable partnership agreement, you might find it difficult to control and operate your growing business.
While partnership agreements can be very short, it’s typically a good idea to create a more detailed document. Compared to other business organizations like limited liability companies (LLCs) and corporations, partnerships have few legal formalities. While certain types of partnerships do have to register in Hawaii, they don’t have boards of directors or significant reporting requirements.
Rather than operate in a vacuum, consider creating a partnership agreement. It can help define each partners’ role, the business’ procedures, and how you’ll approach issues during the business’ lifetime.
What Questions Should You Consider?
Consider the following questions:
- How will you divide work and leadership decisions between the partners?
- Will major partnership decisions require a unanimous vote?
- Who will make day-to-day decisions for the business?
- How will partners receive compensation?
- How much business income will the business reinvest?
- Who owns the partnership’s assets, including intellectual property, client lists, and equipment?
- How will you resolve disagreements between partners?
- What happens if a partner dies or becomes incapacitated?
- If the partnership ends, how will you distribute assets and liabilities?
- How will you handle the partnership’s taxes, debts, and other financial responsibilities?
- What happens if a partner quits and takes on a new project or job?
Without clear answers, these and other issues can create conflict in a partnership. We’ve found that advanced planning and preparation can help partners avoid conflict and build successful businesses.
At DeVries & Associates, we work closely with our clients, getting to know their goals and creating partnership agreements that align with them. Our goal is to build a foundation for your partnership’s success and reduce the risk of unnecessary disputes and disagreements. When necessary, we also guide partners, who are frequently friends and family members, through tough conversations about their business relationships.
What Happens When There’s a Breach of a Partnership Agreement?
If a partner violates a partnership agreement, your business might have a contract claim against them. When a breach occurs, you and your lawyer should always refer to the partnership agreement and follow its dispute resolution processes. For example, partnership agreements can require mediation or arbitration during a dispute.
Sometimes, partnership agreement violations are resolved quickly outside of court. Other times, though, you’ll need to file a lawsuit or claim against the partner, demanding compensation for your damages. However, before you file a lawsuit, your business should consult with an experienced business attorney. A lawyer might help you understand your rights, identify your legal claims, and calculate the extent of your damages. They can also help you comply with your partnership agreement’s dispute resolution processes and required court procedures.
DeVries & Associates not only negotiates and drafts contracts for its clients — we also have a team of skilled litigators that enforce them. If your business is dealing with a significant breach of contract, contact us for a confidential, no-risk consultation. We’ll assess your situation and help you understand your legal options.
Converting a Partnership to an LLC or Corporation
As your business grows, you might find that a partnership no longer serves your needs. You might consider converting your business to another business organization structure, such as an LLC or corporation. DeVries & Associates guides clients through this complicated process and works to ensure legal compliance. To learn more about your business options, contact us for a personalized assessment and consultation.
Discuss Partnership Agreements With a Hawaii Business Lawyer
DeVries & Associates’ trusted business lawyers help their clients build both effective and practical partnership agreements. We also review and enforce these contracts for them. If you’d like a free and confidential assessment of your business’ needs and circumstances, contact us today. We’d love to hear more about your partnership and its long-term goals.