General Partnership Agreement
Definition of a general partnership agreement
A general partnership agreement is created any time two or more people come to an agreement to enter into a business together, whether they have a written contract or not. Hence the need to formalize the details in a partnership agreement that contains the specifics of the responsibilities, rights, and share of profits of the partners. A basic LegalZoom partnership agreement entails a business arrangement by which various individuals agree to share profits, assets, and legal and financial liabilities of a business that is jointly-owned.
Further, in a LegalZoom partnership agreement, partners agree to unlimited liability hence the liabilities are not capped and could be paid through the seizure of the assets of an owner. Also, any partner could be sued for the debts of the business. Every partner is also liable for the personal tax liabilities such as partnership earnings on the income tax returns like taxes that do not flow through the LegalZoom partnership agreement.
About LegalZoom
In 2001, LegalZoom established itself as a technological company dedicated to availing legal aid to everyone. With the mission in mind, LegalZoom launched more than 10 online services focused on estate planning, intellectual property protection, and business formation. Among the services offered is the LegalZoom partnership agreement.
In 2010, after an entire decade of growing their services, LegalZoom innovated again and established an autonomous network of lawyers. This was meant to offer customers independent legal advice on various aspects, LegalZoom partnership agreement included.
Additionally, LegalZoom believes that legal aid ought to be accessed by everyone, notwithstanding their status. Hence the site is non-discriminatory. The site also strives to support the small business communities and public in general through the social impact efforts. In order to do this, the site is establishing solid partnerships with non-profit to aid in lifting up underrepresented and undeserved communities. These are excluded from the ancient legal system. Beyond the partnerships, the site takes part in corporate giving and empowers employees with community service days off and corporate matching programs.
The risk of using legal zoom for general partnership agreements
The contemporary world in one of ‘do-it-yourself’ with the majority of the people willing and ready to perform their tasks personally. A few Google searches and several YouTube videos aids in solving anything hence the declining resort to agreements like LegalZoom partnership agreements. However, in as much as people are increasingly adopting the DIY spirit, some activities should just be left to professionals.
The most favorable legal advice for a specific situation is always one that emanates from an experienced legal professional. Furthermore, it can not just come from any legal professional. Thus, it needs to be from a lawyer that focuses on a specific area of business. The most favorable advice for a general partnership agreement could be done by an experienced legal professional in the area.
Online legal sites like Rocket Lawyer and LegalZoom attract entrepreneurs that have earnest intentions, small business owners, and daily consumers with the promise of quality forms. However, the sites don not serve as substitutes for attorneys. Some of the reasons include:
- LegalZoom acknowledges its own restrictions in aiding small business owners with contracts. It has a long disclaimer on its site that admits its insufficiency in offering legal advice.
- Expensive errors caused by oversights in the legal documents may not rear their ugly heads till it is too late.
- The majority of the legal forms could be obtained for free on online sites. If it is just the form that is needed, the majority save their money and skip the DIY legal sites.
- Laws are amended and the vary from one state to another. Accordingly, the majority of the people do not want to risk relying on documents marred with inaccuracies and mistakes. The terms of use of the LegalZoom partnership agreement have a disclaimer that the site is not guaranteed to compete, up-to-date or correct.
Further, filling out a LegalZoom partnership agreement form could be a place to begin with a business contract. However, it should never be used as a final document. The preceding is because there are too many risks without the help of an attorney to advise, review, and ensure that it comprises what it needs for a precise situation. Additionally, a lawyer aids in rectifying a LegalZoom partnership agreement and prevent costly errors that could be avoided with an accurate and comprehensive contract. Taking such effort early and paying the standard costs for legal aid up front could save one serious litigation costs.
Understanding LegalZoom partnership agreements
LegalZoom partnership agreements provide participants with the flexibility to establish their businesses in a manner they consider fit. This grants the partners the ability to control the operations at close range. It also permits the partners to have a more decisive and swift management compared to organizations. Such often slog through the various levels of bureaucracy complicating and dragging the process of enforcement of novel ideas.
Generally, a LegalZoom partnership agreement that is general should satisfy certain conditions which include:
- The partnership comprises a minimum of two people.
- Every partner should agree to any liabilities incurred by the partnership.
- The partnership is ideally memorizable in a written and formal partnership agreement or valid oral agreements.
General features of a LegalZoom partnership agreements
Generally, in general partnerships, every partner has the authority to unilaterally enter into a binding agreement, contract or business deal. Further, the rest of the partners are obligated to adhere to such terms. Such activities could lead to disagreement. Therefore, effective LegalZoom partnership agreements include conflict resolution mechanisms.
In some instances, the partners agree to proceed with main decisions if there exists a majority vote or complete consensus. In other instances, the partners delegate non-partners appointed to manage the partnerships. This is likened to an organization’s board of directors. In any case, a comprehensive agreement is important because when all partners have unlimited liability, even the innocent players could be fiscally on the hook when the partners commit illegal inappropriate actions.
LegalZoom partnership agreements also contain a clause indicating when a general partnership agreement ends. General partnerships dissolve when a party becomes disables, dies, or leaves the partnership. Provisions may be written into an agreement that provide directives for moving forward in such situations. For instance, a LegalZoom partnership agreement may include a provision stipulating that the deceased partner’s interest is transferred to the successor or surviving partner.
Benefits of general partnership agreements
The cost of creating a general partnership agreement is less expensive than the setting up of a corporation or a limited liability partnership. Creating general partnerships and the subsequent general partnership agreement is cheaper, simpler, and requires less formalities compared to a company. Further, LegalZoom partnership agreements indicate that general partnerships do not pay income tax. All the profits and losses are also passed through to the partners. LegalZoom partnership agreements that relate to general partnerships also make the dissolution process by the partners easy.
Demerits of General Partnership Agreements
Despite the various benefits of general partnership agreements, they have their own disadvantages. Such include:
- Partners face potential unlimited liability. Owing to the lack of a corporate structure, a general partnership does not establish itself as a business entity that is separate from the partners. The preceding is clearly outlined in a LegalZoom partnership agreement. Further, the partners are not protected from lawsuits lodged against the business and their personal assets could eb seized to cover the outstanding obligations of the business.
- LegalZoom partnership agreements also indicate that the partners are liable for each other’s actions in a general partnership set-up. Every partner is also liable for the actions of other partners. If a partner executes an agreement without notifying the rest of the partners, they are still bound to honor the terms of the agreement.
Other types of Partnerships created by LegalZoom partnership agreements
Other than a general partnership, there are two other types of partnerships that are provided for by LegalZoom partnership agreements. They include:
- Limited partnerships. In a limited partnership, at least one of the partners has unlimited liability and is commonly referred to as a general partner. The rest of the partners are subject to limited liability and are known as limited partners. LegalZoom partnership agreements that revolve around limited partnerships indicate that limited partners are not involved in the active management of the business. Further, that one can not lose more than the money they have contributed to the partnership.
- Limited liability partnership. LegalZoom partnership agreements indicate that in a limited liability partnership, there is no general partner. Further, all the partners are permitted to be involved in the partnership’s management. LegalZoom partnership agreements also indicate that the partners enjoy limited liabilities. Limited liability partnerships are also preferred by professional service business since the partners in a limited liability partnership are not liable for negligence claims that are made against themselves and the partners.
References
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