This type of agreement addresses major changes in the partnership arrangement. For example, what if one partner voluntarily or involuntarily leaves the partnership? How are they bought out? What happens if you want to sell your ownership interest - should your business partner have a right to buy it before you sell it to a third party? What if your business partner dies? Or gets divorced? Or files for bankruptcy? Or just wants to retire?
The partnership agreement should indicate the events upon which the partnership is to be dissolved and its affairs wound up. It’s possible the business concept and model don’t lend themselves to answering this question. But, for example, in a real estate deal, it’s important to have a timeline and possible triggering events that will lead to either selling the property or buying out one of the partners if they don’t want to stick around for the long haul.
Which events or decisions will require a unanimous vote of the business partners? It’s crucial that you and your business partners decide the procedure together from the outset.
Carefully consider this provision, which is a double-edged sword. The benefit of such a provision is that you can put in writing when a partner can be forced out of the business. For example, you and your partners could agree that if one partner isn’t pulling their weight, they can be forced out. But be certain your well-deserved, three-week vacation to Tahiti doesn’t trigger the expulsion clause.
For example, you and your business partner(s) may agree that if one of the partners leaves the business, they cannot open a competing business or work for a competing business within a certain number of miles and for a certain period of time.
Some examples include a provision for attorney’s fees for the non-breaching party if they win a lawsuit, a mediation or binding arbitration clause so you don’t have to go to court if you don’t want to, or a venue or choice of law provision on which state law would be applied in a contract dispute and where the dispute would be litigated.