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Preparing for a smooth partnership transition

On Behalf of | Jan 28, 2020 | Business & Commercial Law

Developing a partnership agreement is something that requires business professionals to carefully assess their goals and the future of their organization. Beneficial agreements will enable both parties to contribute their skills and competencies in a manner that will enable each other and result in success.

Because the nature of a partnership agreement may change, it is imperative that organizational leaders address potential outcomes in their initial agreement. When developing their contract, both partners should discuss their expectations for each other and for what they wish to yield from the relationship. Points of interest should include what will happen if one of the signees fails to abide by the terms of the contract. This could happen if one of the parties becomes disabled or unable to fulfill their duties due to personal indifference or challenges, desires to terminate the agreement or acts negligently, ultimately disrupting the agreement.

According to Entrepreneur.com, clearly stating how the process of dissolution would work and under what circumstances an exit strategy would be considered in a clause within the contract can be an effective way to provide direction in situations where a partnership transition occurs.

Forbes also reminds business professionals of the importance of accounting for “critical developments” that may happen when two people or entities agree to work together. Examples of some critical developments within a partnership agreement include a company buyout, death of a partner, personal requests for modifications and retirement of a partner. Discussing these situations and how different scenarios would affect the expectations of each party can help to reduce the risk that costly disagreements happen.