Business Agreements And Partnership Agreements

Business Agreements And Partnership Agreements

A business partnership agreement is a legally binding document that outlines details about business operations, ownership stake, financials and decision-making. Business partnership agreements, when coupled with other legal entity documents, could limit liability for each partner. Business partnership agreements should always be written and/or reviewed by legal counsel prior to any signatures. A business partnership agreement establishes clear rules for the operation of a business and the roles of each partner. Business partnership agreements are put in place to resolve any disputes that arise, as well as to delineate responsibilities and how profits or losses are allocated. Any business partnership in which two or more people own a stake of the company should create a business partnership agreement, as these legal documents could provide key guidance in more difficult times. A business partnership agreement is a legal document between two or more business partners that spells out the business structure, responsibilities of each partner, capital contribution, partnership property, ownership interest, decision-making conventions, the process for one business partner to sell or leave the company, and how the remaining partner or partners split profits and losses. While business partnerships seldom begin with concerns about a future partnership dispute or how to dissolve the business, these agreements can guide the process in the future, when emotions might otherwise take over. A written, legally binding agreement serves as an enforceable document, rather than just an oral agreement between partners.

A business partnership agreement is a necessity because it establishes a set of agreed-upon rules and processes that the owners sign and acknowledge before problems arise. If any challenges or controversies do arise, the business partnership agreement spells out how to address those issues. A business partnership is just like a marriage: No one goes into it thinking that it’s going to fail. But if it does fail, it can be nasty. With the right agreements in place, which I’d always recommend be written by a qualified attorney, it makes any potential problems of the business partnership much more easily solved and/or legally enforceable.” In other words, a business partnership agreement protects all partners in the event things go sour. By agreeing to a clear set of rules and principles at the outset of a partnership, the partners are on a level playing field developed by consensus and backed by law.

Business partnership agreements are necessarily broad, touching virtually every aspect of a business partnership from start to finish. It is important to include all foreseeable issues that could arise regarding the co-management of the business. These are some of those issues:

• Ownership stake: A business partnership agreement clearly spells out who owns what percentage of the business, making each partner’s stake in the company clear.
• Business operations: Business partnership agreements should explain which activities the business will engage in, as well as which activities it will not.
• Decision-making: A business partnership agreement should outline how decisions are made and the responsibility of each partner in the decision-making process. This includes who has financial control of the company and who must approve the addition of new partners. It should also include information on how profits and losses are distributed amongst the partners.

• Liability: If the business partnership is set up as an LLC, the agreement should limit the liability each partner faces. To do so effectively, a partnership agreement should be paired with other documents, such as articles of incorporation. A business partnership agreement alone is likely not enough to fully protect the partners from liability.
• Dispute resolution: Any business partnership agreement should include a dispute resolution process. Even if partners are best friends, siblings or spouses, disagreements are a natural part of doing business together.
• Business dissolution: In the event the partners choose to dissolve the business, a business partnership agreement should outline how that dissolution should occur, as well as continuity or succession planning should any of the partners divest from the business.

Steps To Implement A Business Partnership Agreement

A business partnership agreement does not have to be set in stone, especially as a business grows and develops over time. There will come opportunities to implement new elements of a partnership agreement, especially if unforeseen circumstances occur.
• Initial partnership: This is when two or more partners first enter into business together. It involves drafting an agreement that governs general operation of the business, the decision-making process, ownership stakes and management responsibilities.
• Addition of limited partners: As a business grows, it might have the opportunity to add new partners. The original partners might agree to a small carve-out of minor equity ownership for the new partner, as well as limited voting rights that give the new partner partial influence over business decisions.
• Addition of full partners: Of course, sometimes the addition of a limited partner will lead to their inclusion as a full partner in the business. A business partnership agreement should include the requirements and process of elevating a limited partner to the status of full partner, complete with full voting rights and influence equal to that of the original partners.
• Continuity and succession: Finally, a business partnership agreement should take into account what happens when the founders retire or leave the company without initiating dissolution. It should be clear how ownership stake and responsibilities will be distributed among the remaining partners after the departing partners take their leave.
Partnership agreements need to be well crafted for a myriad of reasons. One main driver is that the desires and expectations of partners change and vary over time. A well-written partnership agreement can manage these expectations and give each partner a clear map or blueprint of what the future holds. Your partnership agreement should speak to your unique business relationship and business operation. Again, no two businesses are alike. However, there are key provisions that every partnership agreement should include:
• Your Partnership’s Name: One of the first tasks you and your partners will check off your to-do list is making a decision on your business’ name. The business name may reflect the names of the partners or it may have a fictitious name. In either case, the name of your business should be registered with your state. Assuming you’ve conducted a comprehensive search of the name you’ve decided on, registration will confirm that no other business exist with the same name and will prevent others from using your name. The name of your business partnership is a key provision because it explicitly identifies the partnership and the business name for which the agreement exists. This eliminates confusion, especially when there are multiple partnerships and/or businesses that may be involved.
• Partnership Contributions: In most cases, partners’ contributions (time, resources, and capital) to the business vary from partnership to partnership. While some partners provide start-up capital, others may provide operational or managerial expertise. In either case, the specific contributions should be stated in the written agreement. It’s also a good idea to include terms that address anticipated contributions that may be required before the business actually becomes profitable. For example, if the start-up investments are not sufficient to carry the business into a profitable state, the partnership agreement should state any expectations for additional financial contributions from each partner. This avoids any surprises down the road for a key contributor.

• Allocations – profits and losses: Partnerships are formed with the expectation of making a profit. The partnership agreement should speak to the when and how profits are allocated to each eligible partner. In addition, it should speak to how losses will be distributed during the business’ operation and in the event of dissolution.
• Partners’ Authority and Decision Making Powers: Each partner has a vested interest in the success of the business. Because of this vested interest, it’s generally understood that each partner has the authority to make decisions and to enter into agreements on behalf of the business. If this is not the case for your business, the partnership agreement should outline the specific rules pertaining to the authority given to each partner and how business decisions will be made. To avoid confusion and to protect everyone’s interest, you need to discuss, determine and document how business decisions will be made.
• Management: In the beginning phase, there are many tasks to accomplish and some management roles may overlap (or may only require temporary oversight). While you do not have to address each partners’ duty as it relates to every single aspect of your business operations, there are some roles and responsibilities you need to assign and outline in a formal agreement. Roles and responsibilities related to accounting, payroll, and even human resources are worthy of noting in the partnership agreement because of their critical and sometimes sensitive nature. Even if you have an existing agreement, you may want to update your agreement to address these important managerial responsibilities.
• Departure (withdrawal) or Death: When entering a business partnership, it’s natural to want to avoid uncomfortable discussions about a future breakup that may never happen. No one wants to think of a possible separation when a relationship is just beginning. However, business separations happen all the time and occur for many reasons. Any of these reasons can affect you personally and professionally. Therefore, no matter the reason for the separation, the process and procedures for departure should be outlined in the partnership agreement. It’s also wise to include language that addresses buyouts and shifts in responsibility should one partner become disabled or deceased.
• New Partners: As the business grows and expands, the increased need for new ideas, new resources, and new strategies grows as well. At times, growth may mean adding a new partner. Plan ahead for these new opportunities in the partnership agreement by specifying how new partners will be on-boarded into the existing partnership.
• Dispute Resolution: As stated before, disputes are inevitable in any relationship. In business relationships, disputes can become deadlocked and may even require mediation, arbitration, or unfortunately lawsuits. Try avoiding the time and costs associated with lawsuits by requiring mediation and arbitration as a first (and hopefully final) resolution to business disputes. There are many ways to resolve disputes, so your partnership agreement can list alternative methods for dispute resolution. The point is to formally identify these methods of resolution in advance be listed them in the partnership agreement when all heads are cool and clear.

Why Your Business Partnership Needs a Written Agreement

• To set up the roles and responsibilities of each partner and to describe how decisions are made. Who is the managing partner? What are the responsibilities of individually named partners? How do roles and responsibilities change?
• To avoid tax issues, by having the tax status of the partnership spelled out, and to show that the partnership is distributing profits based on acceptable tax and accounting practices.
• To avoid legal and liability issues, spelling out the liability of individual partners (general partners vs. limited partners) and the liability of all partners if there is a liability issue with one partner.
• To deal with changes in the partnership due to life challenges of existing partners – partners who leave, become ill or incompetent, get divorced, or die. These are usually dealt with in buy-out agreements with each partner.
• To describe the circumstances under which new partners can enter the partnership.
• To deal with partner issues, like a conflict of interest and non-compete agreements.
• To override state laws. Some states have required language in partnership agreements. But this language may not be the best for your particular partnership. If you don’t have a formal written agreement, you may find yourself having to abide by the default state laws.
• To make disputes easier. It’s a good idea to include language in your partnership agreement that describes how disputes will be handled. Will arbitration be a possibility? What will be the responsibility of parties to the dispute? Who pays for what?

Why You Need an Attorney to Help Prepare a Business Partnership Agreement

The only disadvantage to having a partnership agreement is that you might have language that is unclear or incomplete. A DIY partnership agreement risks not getting the wording right, and a poorly worded contract is worse than none at all. Getting an attorney to help you with the process of preparing your partnership agreement seems like it’s an expensive waste of time. It’s not. Remember, if it isn’t in writing, it doesn’t exist, so putting every possible situation or contingency into a partnership agreement can prevent expensive and time-wasting lawsuits and hard feelings between the partners.
• To avoid tax issues, by having the tax status of the partnership spelled out, and to show that the partnership is distributing profits based on acceptable tax and accounting practices.
• To avoid legal and liability issues, spelling out the liability of individual partners (general partners vs. limited partners) and the liability of all partners if there is a liability issue with one partner.
• To deal with changes in the partnership due to life challenges of existing partners – partners who leave, become ill or incompetent, get divorced, or die. These are usually dealt with in buy-out agreements with each partner.
• To describe the circumstances under which new partners can enter the partnership.

• To deal with partner issues, like a conflict of interest and non-compete agreements.
• To override state laws. Some states have required language in partnership agreements. But this language may not be the best for your particular partnership. If you don’t have a formal written agreement, you may find yourself having to abide by the default state laws.
• To make disputes easier. It’s a good idea to include language in your partnership agreement that describes how disputes will be handled. Will arbitration be a possibility? What will be the responsibility of parties to the dispute? Who pays for what?
The only disadvantage to having a partnership agreement is that you might have language that is unclear or incomplete. A DIY partnership agreement risks not getting the wording right, and a poorly worded contract is worse than none at all. Getting an attorney to help you with the process of preparing your partnership agreement seems like it’s an expensive waste of time. It’s not. Remember, if it isn’t in writing, it doesn’t exist, so putting every possible situation or contingency into a partnership agreement can prevent expensive and time-wasting lawsuits and hard feelings between the partners.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506
Ascent Law LLC
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What are Unfair Business Practices in Utah?

what are unfair business practices in utah

If you are a business owner, knowing the ins and outs of fair and unfair business practices are important. If you are careful about being aware of what is unfair, you are much more likely to avoid disputes and lawsuits, which, for obvious reasons, is good for your business.

The Unfair Practices Act

If you own a business in Utah, you ought to be very aware of the Unfair Practices Act that Utah has in place. This act is designed to protect consumers from being discriminated against, taken advantage of, and from unfair competition.

The details of this act may be found here but the main points of unfair practices that this act protects against are:

● Discrimination in price between different purchasers of commodities of like grade and quality

● Paying or accepting anything of value as compensation, or any allowance or discount in lieu thereof, except for and not exceeding the actual cost of such services rendered in connection with the sale or purchase of goods

● Discrimination in favor of one purchaser against another purchaser

● Advertising goods you are not prepared to supply

Avoiding Unfair Business Practices

It is, of course, natural to want to have a successful business that accrues plenty of profit. Some unfair practices may even seem like a logical way to boost your revenue. Nevertheless, these practices should be avoided at all costs, otherwise your business may be subject to legal consequences.

Additionally, it is also important to be familiar with the laws so you do not inadvertently infringe upon them. Knowing what you can and cannot do when advertising, the types of things that you must disclose to your customers, and other such guidelines can save you from having to deal with lawsuits over unfair business practices.

Keep the following guidelines in mind when advertising and selling products to your customers:

● Ensure information about price, value, and quality is not misleading.

● Ensure that any disclaimers are prominent and visible, not obscured by images, graphics or text, and do not undermine or contradict the main offer.

● Ensure that any promises, opinions, or predictions are true or have reasonable grounds to be true.

● Ensure that you give consumers enough information to make an informed choice. Do not remain silent about important facts regarding your goods or services.

● Ensure that your advertisements are not offensive.

● Ensure that you do not make false or misleading claims about the characteristics of your goods or services.

● Ensure that you provide any gifts, rebates or prizes that you offer. They must match their advertised description.

● Ensure that you keep a reasonable supply of any sale items you advertise.

● Ensure that you never take advantage of a vulnerable person.

● Ensure that you always act in good conscience.

● Ensure that you do not use undue pressure, influence or unfair tactics to force a consumer into an unreasonable contract.

For more information on unfair business practices, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (801) 676-5506 today.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.7 stars – based on 45 reviews


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Salt Lake City Business Litigation Attorney

Salt Lake City Business Litigation Attorney

As lawyers who fight court battles for our business clients, we’ve come to realize over the years that if the businesses we represent can sign some documents before the fights begin — maybe when the company is first established — then, if contract disputes or other disagreements arrive, we have a better chance at resolving the case without going to trial.

Don’t misunderstand us — we love going to court and battling it out in litigation. We enjoy that – it is our job. However, with that same enjoyment in the courtroom, we realize that out clients are better served when they can avoid the courtroom.

Trial Lawyers in Utah

As litigation attorneys, one of the skills that we must have is the ability to convey a story to the jury or judge. Judges don’t need a story as much as a jury. Jurors can get bored during a trial. We have polled jurors after verdicts and we find that legal concepts can evade them. When it comes to business trial work, we prefer to have judges rule on every decision possible. A judge who has prior business litigation experience is extremely helpful because that judge will understand the legal concepts and arguments advanced. When a trial is necessary in your business, please call us to discuss our availability to represent your business. We have all types of business litigation from trademark infringement, collection matters, breach of contract, non-compete agreements, and buy-sell agreements to name a few.

Business Owners Should Have a Buy-Sell Agreement

If you own a business with someone, you may have heard the term “buy-sell agreement” or a “buyout agreement.” This is a common legal document that serves as a fail-safe for many owners and it may be pertinent for you to have use draft one for you. Understanding buy-sell agreements in more detail may help you decide if creating one it right for you and your business.

What is a Buy-Sell Agreement?

A buy–sell agreement is a legally binding agreement between co-owners of a business that determines what should be done if a co-owner leaves the business because of death or any other external circumstance. Essentially, it’s like an estate plan for businesses.

There are three common types of buy-sell agreements: cross-purchase, redemption, and hybrid. Each form has different functions, and it is important to understand the differences so you know what sort of buy-sell agreement you will need.

A cross-purchase agreement is a type of buy-sell agreement where the co-owners agree that in the event of departure of a co-owner, they will buy out that co-owner’s share of the business at a specified price.

A redemption agreement is a type of buy-sell agreement where the company buys the departed owner’s share of the business. Typically, the business will have a life insurance policy for each owner and in the event of death, will use the resulting money to purchase the deceased owner’s share.

A hybrid agreement is a type of buy-sell agreement which combines the other forms of buy-sell agreements, requiring the remaining owners and business to purchase the interest of the departing owner. If the owners won’t buy the departing owner’s interest, the business is then obligated to do so.

However, all buy-sell agreements are unique to each business, so it is important to consult with a lawyer about the right buy-sell agreement for you and your business.

Why Should I Get a Buy-Sell Agreement?

If you co-own a business, or want to start a co-owned business the long and short of the matter is that you need a buy-sell agreement as soon as possible. These agreements protect your interests and the interests of the business when a co-owner wants to leave or is forced to by extenuating circumstances. Without a buy-sell agreement to protect your interests and the interests of the other owners of your business, you put yourself at significant financial risk.

Sometimes, we forget to do what is important in business. This is why you should make sure you have a business litigation attorney on your side. When things go wrong, you will need the top Salt Lake City Business Litigation Attorney on your side and you will find them at Ascent Law, LLC.

Conclusion

In the absence of a buy-sell agreements, situations like sudden death or mental or physical illness can have a major detrimental effect on your business. If there is no agreement, your co-owners may be unable or unwilling to buy your share of the business, forcing you or people you care about to sell your share to a third party at an amount far less than the actual worth of your share because of the desperate situation. We could tell you horror story after horror story of situations that went wrong. Don’t let that be you. Buy-sell agreements prevent such situations from occurring and ensure that all parties maintain financial security in the business in the event of an unavoidable departure.

For more information on buy-sell agreements, a free initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (801) 676-5506 today.

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.7 stars – based on 45 reviews


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Business Lawyer for Buying a Business in Utah

mergers and acquisistions lawyer in utah

Business Lawyer in Salt Lake City Utah

Generally speaking, buying a business is less risky than starting your own, largely because the business you’re buying already has incoming profits. However, there are still drawbacks, and it is important to buy a business in a field you are already very familiar with. Finding such a business can be difficult though, and there are people to help you.

Do You Need a Business Broker in Utah to Buy a Business?

A business broker can be an efficient way to find a business that would be good for you to buy. Brokers are well-versed in the business market and know effective strategies for pre-screening businesses, helping you pinpoint your interests, negotiating, and assisting with paperwork.

Do You Need a Business Attorney When Buying a Business in Utah?

Regardless of whether or not you hire a broker to find a business, it is always smart to put together an acquisition team consisting of at least you accountant, and a business attorney in Utah. If you already have found a business to buy, you don’t need a broker to help you.

You really do need a business attorney on your side to make sure that you engage in due diligence. You also need to make sure that you have the right type of business purchase and sale agreement. This contract can save you from making huge mistakes. One of the provisions that you ought to have in your contract is a due diligence period. This period of time to evaluate the business is essential to avoid making a huge mistake. Look over the actual bank statements with your accountant and attorney. This step alone can save you hundreds of thousands if not millions of dollars in the long run.

Your attorney and accountant need to be your team. This team of trusted advisers functions as your transition team and will help you make the best decisions in regards to the purchasing of the business you want to own and perhaps even help operate.

What is Due Diligence in Buying a Business in Utah?

We also talk about due diligence on this website here. You should read that article too.

Before you decide to buy, however, make sure you and your accountant and business lawyer evaluate the value of the business and engage in due diligence. We have a practice of reviewing all bank account statements as well as financial reports to make sure that there is no fraud or cooking of the books. Cooking the books means that the business owner or his book keeper falsified information to get you to pay a higher price for the business. To determine whether this has happened, we need to go through these items and review their current and potential effects on the business:

● Inventory
● Furniture, fixtures, equipment and building
● Copies of all contracts and legal documents
● Incorporation
● Tax returns for the past five years
● Financial statements for the past five years
● Sales records
● Complete list of liabilities
● All accounts receivable
● All accounts payable
● Debt disclosure
● Merchandise returns
● Customer patterns
● Marketing strategies
● Advertising costs
● Price checks
● Industry and market history
● Location and market area
● Reputation of the business
● Seller-customer ties
● Inflated salaries
● List of current employees and organizational chart
● OSHA requirements
● Insurance
● Product liability

Once you have determined the credibility and value of the business to be favorable, a sale price and terms of sale must be negotiated with the seller. This is another situation where your acquisition team is invaluable. Price is a very hard element to pin down and, therefore, it is for the buyer to assess. You and your acquisition team can come to a fair price using various methods, some of which include multipliers, book values, EBITA, and returns on investment.

EBITA means Earnings before interest, taxes, and amortization. This is a way to value a business’ earnings before the deduction of interest, taxes and amortization expenses. It is a financial indicator used widely as a measure of efficiency and profitability. We like to use this value, but there are other values to use when negotiaing a price. The seller obviously wants the highest price possible and the buyer wants the lowest.

Highest Price or Best Terms?

When we represent buyers, we negotiate the lowest price and terms based on our client’s best interests and when we represent the seller, we work to secure the seller’s interest and get the highest amount possible depending on the seller’s goals.

You need to figure out what you are trying to accomplish when purchasing a business. What is your end game or end plan? Do you want to have it as a passive investment where you are hands off or do you want to operate the business and manage it? This will also go into the calculation of a business.

Besides price, do not forget the important element of terms. Some business can be partially or wholly financed through the company itself. This is an option that we, as you business lawyers, can help you with.

Negotiating the actual sale can be difficult because both you and the seller are often coming from very different points of view. It is important to make sure the deal is structured well so the effects of these differences can be minimized. You should always have an attorney review any arrangements for legality and liability issues. Your attorney and acquisition team can also help you negotiate the best method for the deal to proceed.

Mergers and Acquisitions Lawyer in Utah

You should always have a lawyer help you in doing a merger or acquisition. Your business lawyer will have some horror stories to tell you about how things can go wrong. We can tell you that you really need to get an attorney on your side to avoid costly mistakes and a lawsuit later. We could tell you many stories because not only do we close business deals, but we also draft contract and go to court and litigate when someone doesn’t do what they are required to do pursuant to the terms of the contract.

Being careful and taking time for things to settle and work smoothly will assist the process of the business changing hands. Do not be too anxious. Your team will help you, and with patience, thoroughness, and diligence you can buy a business with minimal issue and stress. Above all, as your business attorneys we will make sure that you are protected and you know what you are getting into. When your eyes are opened and you seek both the risks and the rewards and you decide go for it – you’re in the best position possible.

Conclusion

For more information on getting a Utah business lawyer on your side to help you buy a business, sell a company, close a deal, do a merger or an acquisition, please give us a call for your free initial consultation. We have represented both buyers and sellers of corporations both fortune 500 companies as well as small businesses in every sector. So whether you have a new start up to sell or you’re looking to franchise, the information and legal answers you need are on the other end of the line. Calling the Utah Business Lawyer that is right for you is the next step.

Call (801) 676-5506 today for your free initial consultation.

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506
Ascent Law LLC

4.9 stars – based on 67 reviews


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