New York Partnership Agreements
The Court of Appeals of New York ruled in Gelman v. Buehler that when one party withdraws from a partnership created by an oral agreement, there is no breach of contract. The court based its ruling on a provision of the New York Partnership Law, which states that a partnership formed by oral agreement may be dissolved unilaterally if “no definite term or particular undertaking is specified” in the underlying agreement.
So, what are the key terms that you should include in your written partnership agreement? Below are a few considerations:
- Roles of the partners. It is vital that the agreement outline the roles and obligations of each partner. This includes setting forth the time, labor and financial contributions required of each partner.
- Financial distributions. The partnership agreement should outline the ownership percentages of the partners, as well as the allocation of profits, losses and draws.
- Binding authority. To avoid opening yourself to substantial liability, your partnership agreement should provide that a partner must obtain the other partners’ consent before acting to bind the partnership. Your agreement should also set forth the management duties of each partner and what actions require a majority vote.
- Dispute resolution. It is helpful to decide how conflicts between the partners will be resolved. This includes a provision requiring mediation or arbitration to resolve disputes.
- Dissolution. Decide how a dissolution or wind down of the partnership will be achieved.
If you have questions regarding partnership agreements, contact the attorneys at Slater, Tenaglia, Fritz & Hunt.
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