Business Percentage Agreement: What You Need to Know
A Business Percentage Agreement (BPA) is a legal document that outlines the percentage of ownership and distribution of profits between business partners. It sets forth the terms of the partnership and ensures that all parties involved are on the same page when it comes to their roles and responsibilities.
In a BPA, the percentage of ownership is typically based on the amount of financial contribution each partner has made to the business. This can include investments of cash, property, or other assets. The document also outlines how profits and losses will be distributed among the partners, based on their percentage of ownership.
Why is a BPA Important?
Having a BPA in place can help prevent disputes between business partners. By establishing clear guidelines for ownership and profit distribution, partners are less likely to disagree over who deserves what. In the absence of a BPA, partners may have different ideas about what they are entitled to and this can lead to disagreements, lawsuits, and ultimately, the dissolution of the partnership.
Additionally, a BPA can provide protection for individual partners. If the business becomes insolvent or is sued, the BPA can outline each partner’s liability and protect their personal assets from being seized. It can also provide guidance on how to handle buyouts or the sale of the business.
How to Create a BPA
Creating a BPA requires input and agreement from all partners involved. It is essential to work with a lawyer to ensure that the agreement is legally binding and enforceable. The following steps can be taken to create a BPA:
1. Define the percentage of ownership of each partner
2. Determine how profits and losses will be distributed among the partners
3. Establish guidelines for decision-making and the responsibilities of each partner
4. Address potential issues such as buyouts, dissolution of the partnership, and liability
5. Review and sign the agreement with all partners involved
A Business Percentage Agreement is an important legal document for any business partnership. It establishes clear guidelines for ownership, profit distribution, decision-making, and more. By working with a lawyer to create a BPA, partners can protect themselves and their business from potential disputes and legal issues. It’s always better to be prepared and have a plan in place than to deal with problems after they arise.