Why are Partnership Agreements needed?
During the early stages of a partnership, a certain measure of trust is required. Most new business owners who are partners have faith in one another and believe that the company will function smoothly until it is updated, disbanded by choice, or sold for a significant profit.
1. Conflict of interest
Certain circumstances may result in arguments that are difficult to resolve among the owners or partners. Differences in expectations or conflicts of interest may intensify such a situation. Partnership agreements, on the other hand, go a long way toward preventing such circumstances.
2. Avoid infringing country’s regulations
Indonesian company law expressly states that before a partnership can begin operating in the country, the partners must first come to an agreement to describe the partnership’s operational methods and assist it in problem-solving.
Partnership agreements in Indonesia also allow the government to guarantee that the corporation is engaging in activities that are both lawful and consistent with its commercial objectives in Indonesia.
3. Detailed future plan
Another reason partnerships require partnership agreements is that they contain provisions that address what happens if one of the owners dies, becomes disabled, or declares bankruptcy. Any of these occurrences will have a negative impact on the cooperation.
As a result, if a business does not have a formal agreement in place to resolve such issues, the owners may be forced to dissolve the business against their will.
4. Protects all partners
A formal partnership agreement will also include protections to safeguard all of the partnership’s partners. Minority and majority partners often have different interests; however, regardless of these disparities, the agreement should make no distinctions in this area and safeguard all of the partners’ interests equally.
As a result of these provisions, all partners receive the same buyout offers.