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Putting Capital into Your Business Partnership

Businesses can't just run on effort alone. They need money to survive and to be invested so the enterprise can grow in the future. Money can be raised in many ways, including going into debt or finding investors. When a partnership is involved there are many issues that can come up when a partner puts money into the business.

A partnership can be formed simply by the actions of the parties involved even without any kind of agreement, formal or otherwise, between the parties that may result in unexpected liabilities and obligations. That's one reason why it's best to have a partnership agreement in writing so everyone understands their rights, responsibilities and what can be done for a party to leave the partnership or to have it dissolved with the least acrimony and financial harm to all those involved.

It's common that founding partners be required to put a certain amount of money into a business. That may also be needed by someone joining the partnership after it's formed. As the company grows or gets into financial difficulties a partner may also need to add capital.

If you're that partner you need to protect yourself and your investment. That can be done through the partnership agreement or an amendment to it.

● How much power a partner has over the partnership can be determined not just by their time, skills and efforts into the business but also how much capital they've invested.

● If you've put in more money than your partners that should be reflected in how able you are to influence how the business is managed to protect your investment.

● If a partner will be added it should be done in a way that negatively impacts your share of the business and your influence as little as possible.

● In the agreement it should be spelled out if you decide to leave the partnership or if it's dissolved how you'll get your investment back or at least as much of it as possible.

If you are considering forming a partnership or are involved in one already and you have questions about your legal rights and how they can be protected, contact our office so we can talk about the situation, how the law may be applied and what your best options are moving forward.

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