Entering into a partnership agreement in Canada

Business is most definitely the sphere that walks hand in hand with the law. The traditions of trading that finally evolved into modern business require an enormous number of laws, amendments and acts to regulate all the processes and business relations. In this article we will take a look at partnership agreement and related legal issues. Every partnership agreement is usually based on trust between the partners, still every experienced businessman knows that people can change and the interests of partners can change and of course the business situation in general can change. So a properly drafted partnership agreement that covers all the possible conflict situations is a must for any partnership. While some people may view it as a document that shows a lack of trust or even an insult it is actually more of a serious basis for the agreement. Needless to say that only a properly drafted partnership agreement that was done by an experienced lawyer will really provide solutions for all the possible conflict situations that could arise. As for the lawyer of course you will need a lawyer with experience in partnership agreements. It is also great if the lawyer has business experience. Before you establish a partnership in Canada, you will need to meet three criteria: your proposal is for a Canadian business ("every trade, occupation, or profession"); the partnership will have profits (no charity allowed) and you intend to carry on business in Canada and share the profits.

 

 

When drafting a partnership agreement you need to carefully examine four main issues that can be described as four simple questions:

How will we name the partnership?

How will we manage the partnership?

How will we divide the profits?

How will we end the partnership?

 

First thing that you need to do is choosing the name of the partnership agreement. The second thing is to check if the name is not yet registered under the Business Names Act. Very often people tend to name partnerships after their last names and there is a big possibility that there already is a registered partnership under these two last names. Choosing the partners (there can me more than two partners actually) is the next step, closely followed by the general definition of the business that the partners will be involved in. It is also important to specify if the partnership is closed or open for exiting or inviting new partners. Like in every business flexibility is the most important thing for a growing business. The next important step and issue is defining the management rules of the partnership. Voting, decisions, management, contributions and everything related is defined under the second question. Needless to say that this part needs the most attention and time, if the parties are interested in a healthy well established business partnership. The next two big questions are how to divide the profits and how to end the agreement, they basically grow out of the rules established earlier. The last part also must hold possible resolutions for situations when one of the partners dies for example.

 

 

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