As a business owner, you want to make sure your company is protected from potential legal issues. One way to do this is by entering into a legal liability partnership agreement with your partners.
A legal liability partnership (LLP) is a type of partnership in which the partners have limited liability. This means that if the company is sued or owes money, the partners are only liable up to the amount of their investment in the company. This type of partnership is often used by professional service firms, such as law or accounting firms.
Drafting a legal liability partnership agreement is important to ensure that all partners are on the same page and understand their responsibilities and limitations. The agreement should include the following:
1. Business Purpose and Scope
The agreement should clearly state the purpose and scope of the business, including the type of services or products being offered. It should also outline any limitations or requirements for conducting business.
2. Capital Contributions
The agreement should specify how much each partner is contributing to the company, whether it be in the form of cash, property, or services. It should also outline how any future capital contributions will be made.
3. Profit and Loss Sharing
The agreement should detail how profits and losses will be divided among the partners. This can be based on the percentage of capital each partner has invested or other factors agreed upon by the partners.
4. Management and Decision-Making
The agreement should specify how the company will be managed and how decisions will be made. This can include the appointment of a managing partner, the frequency of meetings, and the process for making major decisions.
5. Liability and Indemnification
The agreement should clearly outline the liability of each partner and the limitations of liability for the partnership. It should also specify how the partners will be indemnified in the event of a lawsuit or other legal action.
6. Dissolution and Termination
The agreement should include a plan for dissolving the partnership and distributing assets in the event of termination. It should also specify how the partnership can be terminated and what will happen if a partner decides to leave the partnership.
Entering into a legal liability partnership agreement can protect your business and ensure that all partners are operating under the same rules and guidelines. It is important to work with a qualified attorney to draft an agreement that meets the specific needs of your business.