Business Agreements

In order to ensure your business success it is essential to have a firm grasp on business agreements. This is a huge step in asset protection. This includes everything from what needs to be in them to making sure you actually have them. If you run your business alone you may not need business agreements internally. Yet it is still very important that you have agreements drafted between vendors, and outsiders that you do business with.

Simply by nature of partnership, if you are doing business with another individual you already have an agreement in place. Every state in the US has passed the Uniform Partnership Act. It says that if you and your partner have not drafted an agreement, then it imposes an agreement on you. You are completely under the terms of the act. There is no negotiation. This makes it essential that you make a business agreement on your own terms that are most favorable for you and the parties involved.

The following are two examples of clauses that should be in your business agreement.

Liquidated Damages Clause

This is where both parties agree on a monetary value in case of a breach. For example you and your partner might agree that a mistake would cost you one million dollars. If your contract is breached, that partner is then responsible for the million dollars.

Termination Clause

This is the most important clause in any business agreement. It says what happens if you and your partner decide to not be in business together. There are four ways to terminate a business all of which should be addressed.

• Voluntary termination- This occurs when one or both partners decide that they no longer want to be in business.
• Involuntary termination- This occurs when a third party comes in and breaks up the partnership.
• Death of one of the parties- If not addressed you become in business with your deceased partner’s family. This could be a wife, kids, or whoever else is in their will or trust.
• Disability of one of the parties- A party is considered disabled if he/she can no longer keep up his/her responsibilities in the partnership. Sometimes disabilities can be temporary and sometimes permanent.

A business agreement needs to address all of these conditions. For more information on asset protection and wealth building strategies log onto pfbs.com.