You have decided that the correct course of action for you is to form a general partnership with your best friend, Ben. The two of you have known each other for several years and there is a high degree of trust and respect between you. Someone in your business class mentioned that you and Ben should probably develop a partnership agreement. Why is this a prudent course of action, and what is normally included in the partnership agreement?
What will be an ideal response?
Although there are significant advantages of a partnership over a sole proprietorship, partners and partnerships are challenged by disagreements between partners. Regardless of how well you know and trust your partner, there is always the possibility of disagreements arising over some aspect of the business. It is a good idea to determine ahead of time how these disagreements will be resolved. Another significant reason to develop a written partnership agreement is the issue of stability of the partnership and determining what will happen if one of the partners dies, or wants out of the partnership. A good partnership agreement should be in writing and include: the name of the partnership, the type of business, the duties of each partner, the procedures for dissolving the partnership, the procedures for resolving conflicts and for the distribution of profits and losses, the names of the partners, the expected life of the partnership, and the amounts the partners will withdraw from the business for their services (i.e., salaries).
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