Reading Comprehension Read and translate the following text. Consult a dictionary if necessary. Launching a business: documents and procedures

“I’m forming a partnership with a close friend. Do I need an agreement in writing?” This is a question that lawyers hear frequently. In nearly all cases the answer is Yes, definitely. Prospective partners may be members of the same family, old friends or business associates, but the written agreement is nonetheless appropriate.

The reasons for drawing up such a partnership agreement are much the same as for preparation of a pre-incorporation agreement. Both to build a foundation for the enterprise and to reduce the possibility of later misunderstanding and disagreements.

The Partnership Agreement

Most state have adopted what is called the Uniform Partnership Act to guide partners as they set up and conduct their business. Such an act has some common sense provisions. For example, it may provide that if no partnership agreement exists, the partners will share equally in the business profits. The law may also specify that each partner will, in the absence of an agreement, have an equal voice in the operation of the business.

An agreement in writing takes precedence over such legal provisions. The partners may specify in the agreement the percentage of profits each will receive or who will supervise which aspects of the business.

Some one who brings special knowledge or expertise to the business, or who will have to work unusually long hours, may receive advance recognition.

The agreement might also specify special compensation agreements.

Other Terms of the Agreement

In general, the terms of a partnership should deal with basics as well as with the finer points of the business relationship. The basics include the name chosen for the business, the rights and duties of each partner, and the objectives of

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the business. The agreement can also make note of the investments or other assets contributed by each partner, such as real estate, vehicles, or office equipment.

The business name deserves some thought. Do not choose a name that could be confused with another company name already in use. It is important to select a name that will characterize the business, give it stature, or make it sound attractive or impressive. Some partnerships have names formed from partner’s initials or names.

The agreement should typically indicate how long the partnership will last. If all partners feel it is appropriate, the partnership may be of indefinite duration. In such a case the partnership will continue until it is dissolved by one or more of the partners or until one of them dies or withdraws.

Many partnership agreements state that the partnership will continue for five or ten years. At the end of the specified period the agreement can be renewed if desired.

Other clauses typically appear in partnership agreements. For example, the agreement gives the starting and ending dates of the partnership’s fiscal year. Specific provisions may indicate how any partner can exercise the right to examine the partnerships books, make specific banking arrangements, and lay out procedures for hiring employees, with special attention in many cases to employment contracts.

Contribution of Capital

It is important that the partnership agreement indicate how much capital or other assets each partner has contributed. Insofar as possible, all such assets should be listed. They can include not only those items mentioned but leases, patent rights, and special equipment of one kind or another. All such items rank as capital.

In any partnership one partner may contribute one kind of capital whereas another may contribute another kind.

The agreement should specify clearly what is being contributed and what its value is. Some evaluations may have to be made by rough estimate; in other cases an appraiser should be hired to place a value on a partners non-cash contribution.

The terms of the agreement should spell out, with dates, or target times if possible, when partner’s contributions are due. One partner may invest cash at the time the partnership comes into being; another may contribute funds a year later; a third may make working premises available from the time the partnership goes into business. A partner may agree to invest in the business the first $ 10,000 of his share of the partnership’s profit. Another may loan money to the partnership under specified conditions of repayment. The conditions should include the interest rate to be charged.

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