Mini-Law-Series
Partnership: Investing Right (1)
Good Morning Friends,
It’s the dawn of a new day. In furtherance of our passion to add value using the instruments of law, we have created a platform for direct chat with members of the Online Law Clinic, kindly send a WhatsApp message to 08150949947
Partnership is simply a marriage union of business. A party may bring the idea, while the other party provides funds for the execution of these ideas and so on and so forth. For a Partnership to thrive and survive, it is essential that the intending partners agree on the key terms of the Partnership and these terms reduced into writing. Please let’s remember that we had earlier, on this platform stated that an oral contract is not less of a contract but it is prudent to have a written contract as the intentions of parties can be clearly seen and accordingly interpreted by the Court where there is a dispute of any form.
There are so many factors to be considered where parties intend to venture into Partnership, there are different aspects ranging from finance, structure, succession and dissolution. We will limit today’s feature to the aspect of finance. We have thus, highlighted hereunder some key terms (under finance) to be considered in the course of venturing into partnership:
👉Do both parties have the same objective? It is very crucial that the intending partners have the same or similar objectives with respect to the project to be embarked upon. Parties must agree on whether the Partnership is for profit sake or ‘charity’ sake. Where objectives are the same or nearly similar, both parties are working towards the same end. So, at the commencement of the relationship, let’s ask serious and germane questions, this is why we have been advocating that it is advisable to get a lawyer involved from the moment the discussions start.
👉How will funds be raised? The intending partners must decide at the early stage on the mode and means of raising capital for the project. Would a loan be applied for in a commercial bank, if yes, who provides security for the loan? Would parties make contributions? Can they approach a family member, trusted friend etc., for a friendly loan?
👉What is the quota of each party with respect to raising funds? This is a follow up from the preceding point, where funds are to be raised by contributions, what is the quota of each intending partners? Are they making equal contributions? Are the contributions monetary only? Is there a possibility of monetizing skills and expertise as part of contributions?
👉What is the mode of profit sharing? The intending partners must have a clear understanding of the mode of profit sharing. Questions such as, what is the sharing formula? Are profits to be shared equally? Must be defined in writing.
👉What is the mode of loss sharing? Yes! You read that right. While we honestly wish that profits are made from businesses, we must be realistic. Loss is a reality of life and indeed business. Where a business fails or loss is incurred thereby leading to debts, how will the debts be defrayed? Will all partners be liable in equal proportion?
👉How will the Accounts be operated? We have taken it for granted that an Account will be opened with a Commercial Bank. Where an Account is opened, who are the signatories to the Accounts? How many Accounts will be opened? Is there a need to employ an Accountant? Do parties need an independent Accountant or Auditor at the end of each year?
Next Week on the Mini-Law-Series, we will consider the Structure to put in place where parties intend to venture into Partnership.
Are you planning on partnering with another on a business venture? Do you have an idea you’re sharing, hoping to get an investor or a partner? Are you already doing business with a partner without ensuring that the requisite Agreement is drafted by a lawyer? Are you an Entrepreneur or StartUp Founder seeking legal guidance or support in your business? Please reach out to us on:👇👇
WhatsApp:08090956207
Thank you and have a restful weekend.
Oluwatosin Ajose Popoola Esq.,
For: The Online Law Clinic
#onlinelawclinic #onlinelawfirm #oluwatosinajosepopoola #partnership #entrepreneurs #startUp #Founders #duediligence #profit #lawyer #tolc
Partnership: Investing Right (1)
Good Morning Friends,
It’s the dawn of a new day. In furtherance of our passion to add value using the instruments of law, we have created a platform for direct chat with members of the Online Law Clinic, kindly send a WhatsApp message to 08150949947
Partnership is simply a marriage union of business. A party may bring the idea, while the other party provides funds for the execution of these ideas and so on and so forth. For a Partnership to thrive and survive, it is essential that the intending partners agree on the key terms of the Partnership and these terms reduced into writing. Please let’s remember that we had earlier, on this platform stated that an oral contract is not less of a contract but it is prudent to have a written contract as the intentions of parties can be clearly seen and accordingly interpreted by the Court where there is a dispute of any form.
There are so many factors to be considered where parties intend to venture into Partnership, there are different aspects ranging from finance, structure, succession and dissolution. We will limit today’s feature to the aspect of finance. We have thus, highlighted hereunder some key terms (under finance) to be considered in the course of venturing into partnership:
👉Do both parties have the same objective? It is very crucial that the intending partners have the same or similar objectives with respect to the project to be embarked upon. Parties must agree on whether the Partnership is for profit sake or ‘charity’ sake. Where objectives are the same or nearly similar, both parties are working towards the same end. So, at the commencement of the relationship, let’s ask serious and germane questions, this is why we have been advocating that it is advisable to get a lawyer involved from the moment the discussions start.
👉How will funds be raised? The intending partners must decide at the early stage on the mode and means of raising capital for the project. Would a loan be applied for in a commercial bank, if yes, who provides security for the loan? Would parties make contributions? Can they approach a family member, trusted friend etc., for a friendly loan?
👉What is the quota of each party with respect to raising funds? This is a follow up from the preceding point, where funds are to be raised by contributions, what is the quota of each intending partners? Are they making equal contributions? Are the contributions monetary only? Is there a possibility of monetizing skills and expertise as part of contributions?
👉What is the mode of profit sharing? The intending partners must have a clear understanding of the mode of profit sharing. Questions such as, what is the sharing formula? Are profits to be shared equally? Must be defined in writing.
👉What is the mode of loss sharing? Yes! You read that right. While we honestly wish that profits are made from businesses, we must be realistic. Loss is a reality of life and indeed business. Where a business fails or loss is incurred thereby leading to debts, how will the debts be defrayed? Will all partners be liable in equal proportion?
👉How will the Accounts be operated? We have taken it for granted that an Account will be opened with a Commercial Bank. Where an Account is opened, who are the signatories to the Accounts? How many Accounts will be opened? Is there a need to employ an Accountant? Do parties need an independent Accountant or Auditor at the end of each year?
Next Week on the Mini-Law-Series, we will consider the Structure to put in place where parties intend to venture into Partnership.
Are you planning on partnering with another on a business venture? Do you have an idea you’re sharing, hoping to get an investor or a partner? Are you already doing business with a partner without ensuring that the requisite Agreement is drafted by a lawyer? Are you an Entrepreneur or StartUp Founder seeking legal guidance or support in your business? Please reach out to us on:👇👇
WhatsApp:08090956207
Thank you and have a restful weekend.
Oluwatosin Ajose Popoola Esq.,
For: The Online Law Clinic
#onlinelawclinic #onlinelawfirm #oluwatosinajosepopoola #partnership #entrepreneurs #startUp #Founders #duediligence #profit #lawyer #tolc
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