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Partnership Agreement Limited Company

Partnership Agreement for Limited Companies: What You Need to Know

If you`re considering setting up a limited company with one or more partners, it`s essential to have a partnership agreement in place. A partnership agreement is a legal document that outlines how the company will be run, the responsibilities of each partner, and what happens if one partner wants to leave or the company dissolves. In this article, we`ll discuss the essential elements of a partnership agreement for a limited company.

1. Definition of Partnership

The partnership agreement should clearly define what the partnership is and what it is not. This includes the name of the partnership, the purpose of the partnership, and the business activities that the partnership will engage in.

2. Capital Contributions

The partnership agreement should state how much capital each partner is required to contribute to the company and the timeline for these contributions. It`s also important to outline what happens if a partner fails to contribute their share of the capital.

3. Profit and Loss Sharing

The partnership agreement should describe how profits and losses will be shared among partners. This can be done in proportion to each partner`s capital contribution or based on an agreed-upon percentage. It`s also important to outline how profits and losses will be distributed and if there are any restrictions on distributing profits.

4. Decision Making

The partnership agreement should outline the decision-making process for the company. This includes how decisions are made, who has the final say, and what happens if partners disagree on a decision.

5. Partner Roles and Responsibilities

The partnership agreement should clearly define the roles and responsibilities of each partner. This includes their duties, obligations, and how they will be compensated.

6. Transfer of Ownership

The partnership agreement should outline what happens if a partner wants to sell their share of the company or if a partner passes away. The agreement should also state if the remaining partners have the first right of refusal to buy the departing partner`s shares.

7. Dissolution of Partnership

The partnership agreement should describe what happens if the company dissolves. This includes how assets will be divided, how debts will be paid, and what happens to any unused capital.

In conclusion, a partnership agreement for a limited company is an important legal document that outlines the business structure, roles and responsibilities, and decision-making processes. It`s important for all partners to understand the contents of the agreement and to have it in place to avoid any legal issues down the line.