The articles of partnership are considered an operating manual for a business partnership.
The term “Social Contract” refers to the agreement entered into by those who establish a partnership, such as a sole proprietorship or a company, which is a particular form of business operation. While it may seem counterintuitive to write a complex operating regulation at the start of a business venture, this is actually the best time to narrow down the writing of all the different things that could lead to disagreement or confusion at some point in the future. Many successful businesses were dissolved prematurely, for example when one of the partners died and his heirs had no interest in keeping the business alive and the surviving partners were unable to buy them out.
The articles of partnership should state who will be responsible for the day-to-day operations of the business.
Well-written articles of association will include many different provisions. They will 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 can make arrangements for bringing new members on board and the process by which existing members can voluntarily leave the association. The articles of partnership should also set out how company policy will be carried out and who will be responsible for the day-to-day operations of the company. They must also establish procedures to resolve disputes and to expel partners when such action is considered to be in the best interest of the company.
Law firms are often organized as partnerships.
Some of these provisions may seem extreme for a partnership, but it should be noted that many large and dynamic business operations are partnerships, with hundreds or even thousands of partners sharing in the operations and profits of the business. Most traditional professional organizations, such as accounting firms, are corporations. Law firms are also often organized as partnerships and 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 association of these organizations are very complex and detailed, anticipating all possible contingencies.
The articles of association that govern businesses large and small are meant to serve as their operating manuals. They serve the same purpose as a company’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 allowing management enough flexibility to allow the business to adjust to changing market conditions.