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What are Articles of Partnership?

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  • Written By: Dale Marshall
  • Edited By: Kristen Osborne
  • Last Modified Date: 06 November 2016
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The term “Articles of Partnership” refers to the agreement entered into by those establishing a partnership, such as a sole proprietorship or a corporation, which is a particular form of business operation. While it might seem counter-intuitive to draw up a complex operating charter at the outset of a business venture, that's actually the best time to reduce to writing all the different things that might lead to disagreement or confusion at some point in the future. Many successful businesses have dissolved prematurely, for instance, when one of the partners died and his or her heirs had no interest in keeping the business alive and the surviving partners couldn't afford to buy them out.

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Well-written articles of partnership will include many different provisions. They'll name the company and the partners, identify the nature of the partnership and define what each partner has contributed and is expected to contribute in the future, not only in capital, but also in time and other assets, such as real estate. They may make provisions for bringing new partners on-board and the process by which existing partners may voluntarily leave the partnership. Articles of partnership should also indicate how the firm's policy will be made and who will be responsible for the day-to-day operation of the firm. They should also establish procedures for dispute resolution, and for expelling partners when such action is felt in the best interest of the partnership. Many partnerships will also set forth specific procedures to follow in the case of a partner's death, to try to avoid the possibility of the firm collapsing.

Some of these provisions may seem extreme for a partnership, but it should be kept in mind that many large and dynamic business operations are partnerships, with hundreds or even thousands of partners sharing in the firms' operations and profits. Most old-line professional organizations, such as accountants' firms, are partnerships. Law firms, as well, are usually organized as partnerships, and they try to attract the best new talent by offering partner status to new associates after a certain number of years. Many major league sports franchises are also organized as partnerships. The articles of partnership for these organizations are highly complex and detailed, providing for every possible contingency.

The articles of partnership that govern companies large and small are intended to serve as their operator's manuals. They serve the same purpose as a corporation's articles of incorporation, or a government's constitution. Their success can be measured by the extent to which they prepare the business for different events and circumstances while leaving management enough flexibility to allow the business to adjust to changing market conditions.

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