How To Tell The Difference
When it comes to shareholder and partnership agreements, these terms often get used interchangeably. However, these are referring to two different things. In order to clear up any confusion, we here at DaMore Law have created a quick guide to help. With that said, here is the difference between shareholder and partnership agreements.
First off, let’s take a look at partnerships. A partnership is a group of people who have come together to achieve a business goal together. This is done for each individual’s mutual benefit. Essentially, they have to share both the profits and the losses together. A “Partnership Agreement” lays out all the vital information they will share together. This includes each partner’s responsibilities, management, funding, objectives, and more. In a nutshell, this is an agreement between the partners themselves.
Next, we will dive into shareholders. A shareholder is someone who owns shares in the company. However, they are not required to be involved with the operations of the company itself like partnerships. With that said, shareholders do have certain rights within the company. These include the right to vote at shareholder meetings, receiving reports, and receiving dividends. Basically, this type of agreement is between the shareholders of the company itself.
In conclusion, there is one major difference that separates these two ideas. As stated previously, a shareholders agreement is with the company and its shareholders. Moreover, a company is a separate legal entity, unlike the partners in a partnership agreement. Because of this, partners remain much more liable for the company’s debts. Shareholders do not retain nearly as much responsibility and reliability in this area. To conclude, this difference in liability is what separates the two types of agreements.
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