Do I need a partnership agreement or a consulting agreement?
Hello, can you please review the Partnership Agreement I created for legal accuracy? The purpose I have with this agreement is to establish a partnership within a business that is owned by two of the partners but not myself. This will be a temporary partnership where I myself will be in sort of a consulting role to help the other two partners get their business established and then I will remove myself for them to continue on their own. Another important detail is that I myself will have no ownership in the business entity and will only receive profit sharing in exchange for working in an operations role. The other two members will contribute capital but largely not operate.
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Yes, for your situation, since you're not part of the actual partnership, a consulting agreement would be best. The way your current agreement reads, you have no ownership (and thus wouldn't typically meet the definition of a legal partner), but this is becoming a formal partnership between the 3 of you.
It is possible to create a partnership without ownership, but in your situation, since it's temporary and without ownership, a consulting agreement would be a little more accurate and better preserve the intended legal and financial structure of the arrangement.
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Hello, can you please review the Partnership Agreement I created for legal accuracy? The purpose I have with this agreement is to establish a partnership within a business that is owned by two of the partners but not myself. This will be a temporary partnership where I myself will be in sort of a consulting role to help the other two partners get their business established and then I will remove myself for them to continue on their own. Another important detail is that I myself will have no ownership in the business entity and will only receive profit sharing in exchange for working in an operations role. The other two members will contribute capital but largely not operate.
Lexi, Chatbot
Thank you for sharing these details. Have you already discussed the terms of this arrangement with the other two partners?
Yes.
Lexi, Chatbot
Are there any specific clauses or provisions in the Partnership Agreement that you are concerned about or would like the Corporate Lawyer to pay special attention to?
Just the points stated above.
Lexi, Chatbot
Is there anything else the Corporate Lawyer should know before I connect you? Rest assured they’ll be able to help with your Partnership Agreement.
No.
Elizabeth
Welcome and thank you for using AskaLawyer. My name is Liz and I'm the attorney who will be assisting with your legal question.
So I can best help, could you attach the agreement?
File attached (M1T72Q7)
Elizabeth
Just one thing to begin, you will have no actual ownership?
In the business entity yes, that's correct. I am providing a service in exchange for profit sharing.
Elizabeth
With a partnership agreement, that usually requires you actually be a part of the partnership. Would you instead want a consulting agreement?
Would that work best where I could still operate within their business and receive profit sharing?
You must have ownership to create a partnership?
Elizabeth
Yes, for your situation, since you're not part of the actual partnership, a consulting agreement would be best. The way your current agreement reads, you have no ownership (and thus wouldn't typically meet the definition of a legal partner), but this is becoming a formal partnership between the 3 of you.
It is possible to create a partnership without ownership, but in your situation, since it's temporary and without ownership, a consulting agreement would be a little more accurate and better preserve the intended legal and financial structure of the arrangement.
Ok understood. But how would the compensation be written since it’s not a set amount but rather a share of profits?
Elizabeth
For example, you can have a clause that just says:
Compensation: Consultant shall be entitled to X% of the monthly profit. The profits shall be distributed on a monthly basis on X day.
Great thank you! That helps a lot.
Elizabeth
Of course! You also can use a termination clause, rather than dissolution.
Thank you.
Elizabeth
Is there anything else I can clarify?
No thank you. Have a great day.
Elizabeth
You too!
Elizabeth
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