Question

(IS THERE A PROBLEM THAT IS UNCERTAIN AND NEED TO BE FIX IN THIS PARTNERSHIP AGREEMENT)

PARTNERSHIP AGREEMENT

THIS AGREEMENT made effective as of the 15^thday of JANUARY, 2019.

BETWEEN:

Peter Cutoni (Partner “A”)

Of the Hamlet of Bradwardine, in Manitoba

- And -

Jack Reacher (Partner “B”)

Of the City of Brandon, in Manitoba

- And -

Austin City (Partner “C”)

Of the City of Portage la Prairie, in Manitoba

WHEREAS the parties are all registered owners, each with interest in Pigs on the Fly located 123 Business Street, Brandon, Manitoba.

1.         PARTNERSHIP

            The parties agree to work in partnership and agree to follow the terms and conditions stated in this agreement.

2.         PARTNERSHIP NAME

            The name of the partnership is Pigs on the Fly.

3.         HEAD OFFICE/LOCATION

            The head office will be located at 321 Administration Avenue, Brandon, Manitoba, R2D 2Y1, or at such other place or places that the parties shall from time to time agree on.

4.         TERM

            The partnership will operate from the date of this agreement until (whichever occurs first):

1. The date of the partnership being voluntarily dissolved, if agreed upon by all parties
2. The date of the partnership being dissolved by an operation of law
3. December 31, 2023

5.        PERCENTAGE OF INTEREST

            The parties will each have different ownership percentages in the partnership. Partner A will own 55% of the company and receive 45% of all net profits in the partnership. Partner C will own 35% of the company and receive 35% of all net profits in the partnership. Partner B will own 10% of the company and receive 10% of all net profits in the partnership. All losses and expenses incurred by the partnership will be paid with earnings held within the partnership. If the partnership has insufficient capital to pay for losses and expenses that it incurs, then all expenses and losses will be equally divided and paid for by the three parties. Effort will be compensated with money, by meeting the requirements laid out in the work hours.

6.         DRAWS

Each partner shall draw $2,000 from the partnership on the first day of the year. Each party may withdraw from the partnership. Each party is entitled to their profit share and any amount withdrawn exceeding your profit share will be indebted to the partnership and any amount less than their profit share, entitles them to a cheque for the remaining amount to equal their profit share.

           

7.         CAPITAL CONTRIBUTIONS

            Each partner will contribute the same percentages laid out in the percentage of interest. The total capital contribution will be $100,000, divided amongst the partners as shown above. If further capital is required to advance the business, it will be contributed into relation of the original percentage. If one partner cannot pay, the other partners can provide the remaining percentage.

8.         BANKING ARRANGEMENTS

            The parties agree to enter banking arrangements with Scotiabank Canada. All cheques and documents can be signed by all partner.

9.         FISCAL YEAR

            The fiscal year end of the partnership shall be the last day of the month of December in each year or such other date as the partners must agree.

10.       FINANCIAL STATEMENTS

            We will use Aaron Rodgers from Aaron’s Bookkeeping Services to record and keep track of all of our business transactions, and we will use an accountant to finalize our year-end financial statements. All accounts must be accessible to all parties and their agent at any point in time.

11.       BORROWING OR ENCUMBRANCE OF PARTNERSHIP INTEREST

            No party may borrow money or be required to encumber debt from a partner’s inability to pay unless there is a written agreement signed by each working partner, after a 90 day period has passed which will give the partner a chance to pay. If they can’t pay the debt the partners have an option to encumber it, if they dont the agreement will dissolve.

12.       PAYMENT OF OBLIGATIONS

            Each of the partners will pay his or her own separate debts, liabilities, obligations and duties in the present or future.

13.       INDEMNIFICATION

            As long as the action is in the best interests of the partnership as a whole, any party that contributes more than their fair share to the partnership for expenses incurred by the partnership will be entitled to be reimbursed this amount by the partnership.

14.       NO SALE OF PARTNERSHIP INTEREST

            No partner is allowed to assign their interest in the partnership to another member also within the partnership, firm or corporation without the written consent of the other partners.

15.       MANAGEMENT

            Managerial decisions will be decided with each of the party members having a say in it. A vote will be made on the decision in the interest of the partnership in mind. Vote must be one or the other style and whatever side has more votes will be the outcome. A management decision is based on whether the item being purchased or used affects the partnership as a whole. If it only affects 1 or 2 members, it is not a management decision.

16.       DISSOLUTION

1. At any time one member wishes to leave the partnership, they must sell their share of the partnership to both members where the remaining parties will each take 50% of the contribution of the leaving member. They must give notice to all partners in the agreement and notice to those who have dealt with the partnership. An advertisement will be published in the Brandon Sun to state that the partner is leaving.
2. If one party member cannot pay the half of the capital or choose not to, the other member can purchase whatever amount they want and the other member purchases the remaining percentage of share capital left over.
3. For the discussion of sale price, it will be whatever amount of interest that they own within the company. (Ex. If Partner “A” left, he would sell his share capital for $45 000)
4. If no member wishes to purchase or both members cannot purchase the full share amount leftover, the partnership shall dissolve and any assets that the partnership owns will be sold. Any proceeds after liabilities and debts paid off will be divided to each member based on how much share capital they own.

17.       WORK HOURS

Each partner shall contribute equally to the work needed to be done in the partnership.

18.       ARBITRATION

            In the event of a situation that a arbitrator is required to settle one arbitrator name Philip Flouglberg as agreed upon by all parties will be used in any and all arbitration needs.

19.       AMENDMENT OF AGREEMENT

            If at any time one member decides to want to change a clause from the agreement they can put it up to a vote. If all members agree on it, they can then remove from the agreement.

20.       DEATH OF A MEMBER

            If one party member dies at any point, they are removed from the agreement and all debts which they have will be used first to pay off any debts that they own from their business. Next the rest will be paid in accordance with their interest in the partnership. If one member cannot pay, they can borrow the funds from the other member and is given 1 year to repay him/her back. If they cannot pay the full amount, the deceased members assets will than be used. The interest of the deceased member will then be divided equally to each remaining member. Those remaining members are given 1 year to pay the interest that they gained in the form of capital.

21.       GOVERNING LAW

            All party members within this agreement shall follow the laws set by the Province of Manitoba, and follows the jurisdiction of the Courts of Manitoba.

23.       SEVERABILITY

            The rest of this partnership agreement will be binding on all parties even if one of the conditions is found to be illegal. This partnership agreement will still be binding on all parties even if one of the conditions is illegal.

24.       EXPULSION

            Any of the parties may be expelled from the partnership through the combination of a majority vote and one or more of these instances: one of the parties files for bankruptcy, gets charged or convicted of a crime, breaches the partnership agreement. A party can also be expelled from the partnership if that party wants out of the partnership and there is a unanimous vote to have that party out of the partnership. The partnership will not be dissolved if an expulsion of a party occurs. An expelled party will receive his share of interest in the partnership in assets upon expulsion.

25.       AGREEMENT BINDING

            The agreement will bind the parties to these rules set.

Each party member is required to sign the agreement to complete the partnership agreement.

Each member will be given a copy of said agreement.

SIGNED

Partner “A”

________________________________

Partner “B”

________________________________

Partner “C”

________________________________

Answer 1

ANSWER:

A partnership agreement is a written agreement between to or more individuals who comes together as partners to carry on a business for profit. The agreement lays down the rules and regulations that the partners must adhere to, after entering into the partnership.

It is very important for a partnership agreement to include certain clauses. Below is a list of certain areas that the partnership agreement must contain:

• Name of the partnership.
• Contribution to the partnership.
• Share of profit, losses and withdrawals.
• Partner's authority.
• Partnership decision making.
• Admitting new partner.
• Withdrawal or death of a partner.
• Resolving disputes.

According to me, the Partnership agreement given in the question covers all the important areas that a partnership agreement should contain.

The only problem of the Partnership agreement is with:

PERCENTAGE OF INTEREST:

The parties will each have different ownership percentages in the partnership. Partner A will own 55% of the company and receive 45% of all net profits in the partnership. Partner C will own 35% of the company and receive 35% of all net profits in the partnership. Partner B will own 10% of the company and receive 10% of all net profits in the partnership. All losses and expenses incurred by the partnership will be paid with earnings held within the partnership. If the partnership has insufficient capital to pay for losses and expenses that it incurs, then all expenses and losses will be equally divided and paid for by the three parties. Effort will be compensated with money, by meeting the requirements laid out in the work hours.

PROBLEM: When we add the share of Net profit among the three partners, it comes to 45% + 35% + 10% = 90%, whereas the total of the share of the profit should be 100%.