partnership agreement in a business plan

Everything that you need to know to start your own business. From business ideas to researching the competition.

Practical and real-world advice on how to run your business — from managing employees to keeping the books

Our best expert advice on how to grow your business — from attracting new customers to keeping existing customers happy and having the capital to do it.

Entrepreneurs and industry leaders share their best advice on how to take your company to the next level.

• Business Ideas
• Human Resources
• Business Financing
• Growth Studio
• Ask the Board

Looking for your local chamber?

Interested in partnering with us?

Start » strategy, how to write a business partnership agreement.

Deciding to go into business with a partner is an extremely important decision. Here are some tips for approaching and creating your partnership agreement.

Deciding to go into business for yourself is a major decision on its own — but deciding to join forces with a partner is a completely different ballpark. If you’re thinking about starting a business with a partner, consider structuring your business as a general partnership.

General partnerships are one of the most common legal business entities, granting ownership to two or more people who share all assets, profits and liabilities. In a general partnership, it’s important to understand that each person is responsible for the business and is liable for the actions of their partner(s). To help avoid any issues with your partners throughout your business journey, you’ll want to write a partnership agreement before moving forward.

[Read: What Is a General Partnership? ]

What is a partnership agreement, and why do you need one?

Nolo noted that, because you and your partners are equally responsible for the business, as well as the outcomes of one another’s decisions, creating a partnership agreement is a great way to structure your relationship with your partners to best suit your business.

Partnership agreements are a protective measure to ensure any and all disagreements can be resolved quickly and fairly, and to understand what to do in the event that the partners wish to dissolve the working relationship or business in its entirety.

What should be in a partnership agreement?

Your partnership agreement needs to cover a lot of ground. According to I nvestopedia , the document should include the following:

• Name of your partnership. While it may seem like common sense, one of the first things you and your partner(s) must agree on is the name of your business.
• Contributions to the partnership and percentage of ownership. Create a list of specific contributions you and your partner(s) will make to the business. In addition to contributions, you must decide on the percentage of ownership, which is typically dictated by each partner’s contributions to the business.
• Division of profits, losses and draws. You and your partner must decide how to divide the business’s profits, losses, and draws. Partners can agree to share the profits and losses in accordance with their percentage of ownership, or they can be distributed equally among the partners regardless of ownership stake.
• Partners’ authority. Partnership authority, also known as binding power, should be defined within the partnership agreement. The ability to bind the business to a debt or a contractual agreement can expose the business to unnecessary risk, which is why the partnership agreement should explicitly state which partner(s) have binding authority.
• Withdrawal or death of a partner. While no one wants to consider the possibility of a partner’s withdrawal or untimely death on the brink of launching a new business, this is something that needs to be clearly stated in the partnership agreement. The agreement should also outline the valuation process for the business and/or any requirements for maintaining a life insurance policy designating the other partner(s) as the beneficiaries.

To avoid conflict and maintain trust between you and your partner(s), be sure to discuss all business goals, the commitment level of each partner and salaries prior to signing the agreement.

How do you structure a 50/50 partnership?

• Discuss/agree on important details before drafting . Structuring a 50/50 partnership requires consent, input, and trust from all business partners. To avoid conflict and maintain trust between you and your partner(s), be sure to discuss all business goals, the commitment level of each partner, and salaries prior to signing the agreement.
• Consult with an attorney. Before you draft or sign a partnership agreement, consult with an experienced business attorney to ensure everyone’s investment in the partnership and business is protected.
• Provide both partners with equal access to all fixed assets. When running your business, you and your business partner will have separate roles and responsibilities but complete and equal access to all fixed assets, including any property and equipment you’ve invested in. Including this detail in your business partnership agreement will help ensure total transparency and trust between you and your partner.
• Include a dispute resolution process. With responsibility for the business split between two partners and the high cost of taking legal action, you should include an official dispute resolution process in your partnership agreement to help navigate arguments.
• Determine how you both will be paid. Your partnership agreement should outline reasonable salary expectations for yourself and your partner. Everyone, investors included, should agree to the terms before finalizing the partnership.

Advantages of a partnership

Some of the several advantages of a general partnership include the following:

Easy to establish

Establishing a partnership is simpler and more straightforward than other business structures. Once you’ve drafted a partnership agreement, all partners must agree to the terms listed and sign the document. And unlike other business entities, you don’t have to file federal paperwork — you simply need to file a few documents locally, like a trade name application and partnership authority.

Easy to dissolve

Partnerships can be as easy to dissolve as they are to establish. If all partners agree to dissolve the partnership amicably, refer to the dissolution clause in your partnership agreement and follow the terms outlined. Additionally, you must consult your state’s laws regarding partnership dissolutions, and you may need to file a statement of dissolution. If you and your partners don’t decide to dissolve the partnership amicably, that could complicate the process, especially if legal action is necessary.

Simplifies your taxes

With partnerships, you don’t have to file additional business entity taxes. Your taxes for the business will pass through to the business owners, which means you’ll need to include your share of the business profits and losses in your individual taxes. You’ll also be responsible for paying any additional taxes individually.

Involves extra help and knowledge

Business owners have to play multiple roles, but when you have a business partner to rely on, you can cover more ground than if you were trying to tackle everything alone. A business partner also brings their business expertise to the company, which could differ from your own knowledge and experience. Ideally, your partner has skills and expertise that complement and enhance your own.

Carries less of a financial burden

Rather than taking on the heavy financial responsibility of starting a business alone, your business partner can help ease some of the financial strain. Having a partner to help cover hefty startup costs can be a massive relief to business owners, with the added benefit of possibly being able to invest more upfront or avoid racking up large sums of debt since you’re splitting the responsibility of covering those costs.

Disadvantages of a partnership

Partnerships also come with a few disadvantages, including the following:

Doesn’t protect partners' personal assets and involves no separation from the business

Unlike other business structures, a partnership does not create a separate legal entity from you and the company or from you and your partner. You are liable for any legal or financial difficulties your business may face. Your personal assets could be at risk since they are not covered by the partnership agreement.

Mutual liability

When starting a partnership, you are legally and financially responsible for your partner and the business. If your partner creates legal trouble for the company, you become liable and open to legal prosecution as well. Not only can this strain your relationship with your business partner, but it also affects your personal finances because, as mentioned above, there’s no legal separation from the business unless you dissolve the partnership.

Provides less independence

Unless explicitly stated in your partnership agreement, your partner has an equal say in all business decisions. If you and your business partner disagree on some of the most fundamental decisions regarding your business, such as expansion opportunities, bringing on a management team, or selling the business, this could cause disagreements between you and your partner, hinder your professional growth, or jeopardize the company.

Requires you to split profits

Having a partner means there’s someone to help cover the business’s costs, but that also means you’ll need to split the profits with them. If you have multiple partners, you could be looking at a significantly smaller profit margin than if you started the business alone.

This story was updated by Julianna Lopez. CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Join us on October 8, 2024!   Tune in at 12:30 p.m. ET for expert tips from top business leaders and Olympic gold medalist Dominique Dawes. Plus, access our exclusive evening program, where we’ll announce the CO—100 Top Business! - Register Now!

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here .

RSVP Now for the CO—100 Small Business Forum!

Discover today’s biggest AI and social media marketing trends with top business experts! Get inspired by Dominique Dawes’ entrepreneurial journey and enjoy free access to our exclusive evening program, featuring the CO—100 Top Business reveal. Register now!

For more business structuring tips

A guide to business certifications for small business owners, how to price your product: a step-by-step calculation, 3 reasons small businesses are optimistic about the year ahead.

By continuing on our website, you agree to our use of cookies for statistical and personalisation purposes. Know More

Welcome to CO—

Designed for business owners, CO— is a site that connects like minds and delivers actionable insights for next-level growth.

U.S. Chamber of Commerce 1615 H Street, NW Washington, DC 20062

Social links

Looking for local chamber, stay in touch.

Partnership Agreement: Definition, Benefits, Key Terms

Jump to section.

ContractsCounsel has assisted 299 clients with partnership agreements and maintains a network of 195 business lawyers available daily. These lawyers collectively have 31 reviews to help you choose the best lawyer for your needs. Customers rate lawyers for partnership agreement matters 4.9.

What Is a Partnership Agreement?

A partnership agreement is an internal business contract that outlines specific business practices for the partners of a company. This document helps establish rules for how the partners will manage business responsibilities, ownership and investments, profits and losses, and company management. While the word partners often refer to two people, in this context there's no limit to how many partners can form a business partnership .

Partnership agreements go by different names depending on the state and industry in which they're formed. You might know partnership agreements as:

• Articles of Partnership
• Business Partnership Agreement
• Creation of Partnership Agreement
• Formation of Partnership Agreement
• General Partnership Agreement
• Partnership Contract

Partnership agreements help answer, "What happens if..." questions before they come up in practice to ensure the company runs smoothly. The three main types of partnership agreements are:

• General: In a general partnership , all partners equally share liabilities, profits, and assets.
• Limited: Limited partnerships protect partners who do not contribute capital equally. This way, the partner or partners who contribute the most money or assets earn the most profit and take on the most liability, while partners who contribute less in capital or assets earn less in profits and carry less liability.
• Limited liability : Limited liability partnerships function much the same as general partnerships, but give the partners protection from the malpractice or negligence claims that may arise from their other partners. The distribution of shares in an LLP will depend on the partnership agreement.

See Partnership Agreement Pricing by State

• Connecticut
• District of Columbia
• Massachusetts
• Mississippi
• New Hampshire
• North Carolina
• North Dakota
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• West Virginia

Partnership agreements help establish clear boundaries and expectations regardless of whether your partnership is general, limited, or limited liability.

Benefits of a Partnership Agreement

Partnership agreements offer a host of benefits to those business owners who create one. A few of the most substantial benefits include:

• Business outline The agreement delineates all the elements of the business and how the partners are to manage each, which helps reduce confusion once the business is running.
• Clear responsibilities The partnership agreement clearly establishes personal responsibilities for each partner in terms of capital, profits, losses, and liabilities in addition to business management and oversight.
• Form of mediation The primary benefit of a partnership agreement is in its ability to forestall future arguments. Since all expectations and responsibilities are outlined, all partners should know what they need to do to fulfill their duties.

Potential Consequences

When you start your business, the division of labor and resources between partners might seem obvious, so you might not think it's worthwhile to create a partnership agreement. Unfortunately, your business might suffer negative consequences in the future without one.

• State law Every state has different laws governing partnerships. If you don't create an agreement, state law will automatically govern the future of your company in the case of a partner's death or another change to the partnership, regardless of your wishes or intent. The default provisions under state law may not always align with the wishes of the partners when it comes to business operations.
• Disputes Disputes regarding the operation of the company could arise in the future. With no documentation outlining the goals, responsibilities, and expectations of the partners, the company could suffer.
• Tax implications For those limited or limited liability partnerships, without a clear description of each partner's contributions, the state could assume each partner owns the same share of the company and tax them accordingly. It is worth noting that partnerships are pass-through entities, meaning the business itself is not subject to taxation. The profits and losses pass through to the individual partners who then report them on their personal tax return.

Elements of a Partnership Agreement

Most partnership agreements share some common elements . When you're drafting yours, ensure you include the following categories:

• Name Include the name of your business.
• Purpose Explain what your business does.
• Partners' information Provide all partner's names and contact information.
• Capital contributions Describe the capital (money, assets, tangible items, property, etc.) that each partner provided.
• Ownership interest Offer the specific percentage of the company that each partner owns.
• Profit and loss distribution Explain the percentage of profit and loss assigned to each partner and how the company will distribute revenue.
• Management and voting Outline how the partners will manage the company by delineating individual responsibilities in addition to explaining decision-making and voting between partners.
• Adding or removing partners Create specific guidelines for adding new partners, removing partners who want to leave, and removing partners who don't want to leave.
• Dissolution Describe how you'll liquidate the business and share out any profits should the company dissolve.
• Partnership tax elections Assign a partnership representative to manage all tax communications.
• Death or disability Provide clear instructions for how each partner's ownership in the company should be liquidated or redistributed in the unlikely event of their death or disability.

When to Use a Partnership Agreement

Partnership agreements are for two or more people entering into a for-profit business relationship to use. Almost always, the partners establish a partnership agreement before going into business or just after establishing their company. In some cases, partners create partnership agreements after the fact to ensure everyone has a clear understanding of how the company operates, but it's best to have the agreement established and signed before opening your business's doors.

How to Write a Partnership Agreement

You have several options when establishing a partnership agreement. Since every state has its own laws governing formal business partnerships, you could start by reviewing the state's rules through your Department of State. Another option is to look for templates you can use to simply fill in or guide you as you structure your own partnership agreement. Finally, you can consult an attorney who specializes in contract law. Contract lawyers can help you create a custom partnership agreement.

Here is an article on how to write a partnership agreement.

Using an Attorney

Contract lawyers are your best course of action for establishing an effective partnership agreement. They'll know what's necessary to include for your state and industry and can help ensure that you've thought of and described every possible scenario and element for your business for the smoothest management experience.

Additionally, the use of an attorney ensures a mediating third party who can help ease any initial disagreements and maintain fairness within the contract. Contract attorneys are well-versed in writing legal documents , so they'll use specific language that will offer clear guidance later if needed rather than vague statements that might have seemed sufficient when originally written but are unclear years later.

Related Documents

Besides your partnership agreement, you might benefit from producing several other contractual business documents to ensure the smooth management of your company.

• Business Sale Agreement If you're purchasing your business from someone else, this document outlines all the specifics of the sale.
• Notice of Withdrawal from Partnership While this document might not get used or won't be used for some time, drafting a notice of withdrawal from partnership at the start of the business ensures all partners know what they'll need to do should they decide to exit the partnership.
• Assignment of Partnership Interest This document outlines how to transfer partnership interest between business partners.
• Partnership Amending Agreement Use this document to make any changes to the original partnership agreement.
• Joint Venture Agreement This document outlines the specifics of how two or more people combined their assets or capital for a joint business venture.
• Business Plan Use this internal document as a comprehensive guide on how the business will run, the specific departments, mission, goals, and more.

Partnership agreements are a necessary contract for any professional partnership. They help protect all partners financially and can ease any potential tensions throughout the life of the business. Consult with a lawyer to ensure your partnership agreement fully covers the elements of a partnership.

The Importance of Having a Partnership Agreement

Partnership agreements can resolve potential conflicts between partners. Disagreements may arise around issues, such as ownership division, roles and responsibilities, and asset division, without clearly defined terms and conditions .

Partners should enter into a formal agreement to ensure that both parties form and manage it correctly while avoiding partner conflicts. Disputes can result in expensive legal proceedings and unnecessary financial losses for all parties when contracts don’t address issues adequately.

Types of Partnerships

Partnerships are businesses with two or more business owners. Each partner contributes to the businesses’ financial or operational aspects in exchange for profit & loss (P&L). There are different types of partnerships to address the unique needs of your specific business situation.

There are four partnership types to consider:

• General partnerships (GPs)
• Limited liability partnerships (LLPs)
• Limited partnerships (LPs)
• Limited liability limited partnership (LLLPs)

Various provisions surround the partnership types. A contract lawyer will ensure that you walk away with an amicable agreement for your relationship, industry, company size, and business needs.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

Need help with a Partnership Agreement?

Meet some of our partnership agreement lawyers.

A seasoned senior executive with experience leading the legal and compliance functions of healthcare entities through high-growth periods. I have experience managing voluminous litigation caseloads, while also handling all pre-litigation investigations for employment, healthcare regulatory, and compliance matters. Similarly, I have led multiple M&A teams through purchase and sale processes, including diligence and contract negotiations. Finally, I have extensive contract review experience in all matters, including debt and equity financing, healthcare payor contracting, vendor and employment agreements, as well as service and procurement agreements.

Alen Aydinian is a seasoned real estate attorney with a wealth of experience in handling transactional matters, real estate transactions, and lease agreements. As a licensed real estate broker, Alen Aydinian brings a unique perspective to the table, allowing clients to benefit from both legal expertise and practical industry knowledge. He is a trusted advisor in the realm of real estate transactions and lease agreements. Whether representing buyers, sellers, landlords, or tenants, Alen Aydinian is committed to providing strategic counsel and dedicated advocacy every step of the way. Clients rely on him for sound legal guidance, proactive problem-solving, and unwavering support throughout the transaction process.

Bobby E. Hill, Jr. is a native of Tuscaloosa, Alabama and holds undergraduate degrees in music and business administration from Xavier University of Louisiana. He received his Juris Doctor from the University of Miami School of Law where he was a staff and articles editor for the school’s Race & Social Justice Law Review and a student attorney in the institution’s Immigration Clinic. In addition to freelancing, Bobby is currently a litigation associate at Johnson & Freeman, LLC, a boutique litigation firm in Atlanta, Georgia, where he practices in the firm's Condemnation, Probate, Real Estate Litigation, Real Estate Transactions, E-Discovery and Business and General Civil Litigation Practice areas. In this role, Bobby has acquired appreciable experience in drafting memoranda of law for partners and senior counsel, and all litigation related pleadings including pleadings related to dispositive motions, discovery, appeals, and other post-judgment relief.

Experienced in-house attorney with focus on acquisitions, divestitures, general corporate matters and litigation support.

After starting my professional career in Human Resources in the Healthcare and Non-profit fields, I decided to expand my options and attended law school, passing the North Carolina bar in 2016. Since then, I have practiced in-house for healthcare companies, in the civil rights arena, and run my own business. I am currently looking to return to my legal roots and am excited to practice business law again.

I have 13+ years of experience as a real estate, construction, and general transactional lawyer focused on drafting and negotiating commercial leases, purchase and sale agreements, contractor and design professional agreements, etc.

I'm in general practice with an emphasis on real estate, litigation, and contracts

Find the best lawyer for your project

Partnership

Partnership Agreement

How do I get out of a partnership agreement?

I am looking at options on how to get out of a business partnership I entered into last year.

It will depend on what your partnership agreement says. You would have to look to the language of the agreement you signed to determine that. DISCLAIMER The answers to these questions do not constitute legal advice and does not create an attorney-client relationship with the attorney and anyone who reviews these responses.

Business Contracts

How to exit a general partnership?

I am currently a partner in a general partnership with another individual, but I have decided to leave the partnership for personal reasons. However, I am unsure of the legal steps required to properly exit the partnership, including the distribution of assets and liabilities. Therefore, I would like to seek the guidance of a lawyer to ensure that my exit from the partnership is handled properly and fairly.

You need to review the partnership agreement to see the procedure for exiting the partnership. The partnership agreement will also address distributions.

How can I make a legal contract signature with no experience?

I'm currently making a new crypto coin with my friend. I want to make an official personal contract signature so that my friend doesn't resign or remove me from his team even though I am the founder. So, the point is that if my friend wanted to do the same, he couldn't because he already had a contract signed.

There are clauses that you can put in contracts to incentivize key people to stay in the company.

What is a partnership agreement?

I am starting a business with a partner and we are looking to create a partnership agreement. We want to make sure that all of our rights and responsibilities are clearly outlined in the agreement in order to protect both of us. We want to be sure that we have a clear understanding of our obligations to each other and the business. We also want to make sure that our agreement is legally binding.

A partnership agreement is a legally binding contract between two or more partners that clearly outlines the terms of their business relationship. It details each partner's rights, responsibilities, share of ownership and profits, as well as what happens when a partner leaves or dies. Having a clear partnership agreement is crucial for avoiding future disputes or uncertainties that could undermine the partnership.

What are the essential clauses that should be included in a Startup Agreement?

I am in the process of starting a new business venture with a partner and we are in the early stages of drafting a Startup Agreement. We want to ensure that our agreement covers all the necessary aspects to protect both parties' interests and outline the responsibilities and ownership stakes of each partner. We are seeking guidance on the essential clauses that should be included in the agreement to ensure a fair and legally sound foundation for our startup.

Basic essential provisions to be considered for inclusion in any form of joint venture agreement....whether it be in the form of an LLC OA, a partnership agreement (general or limited), corporate shareholder agreement or other form of joint venture agreement...are (i) Formation and purpose provisions, (ii) initial and additional capital contribution requirements, (iii) % of ownership, (iii) dilution (or anti-dilution) provisions, (v) decision making and other management and voting rights and obligations, (vi) distribution and tax allocation provisions, (vii) purchase options, e.g. ROFOs and ROFRs, buy/sell provisions, tag along and other purchase/sale options, (viii) withdrawal provisions, (ix) Events of Default provision,(x) controlling jurisdiction/venue provisions, (xi)dissolution.termination provisions, and (xii) transfer rights/restrictions. Of course, each agreement must be drafted in the context of the of any special needs or agreements of the parties.,

Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.

Business lawyers by top cities

• Austin Business Lawyers
• Boston Business Lawyers
• Chicago Business Lawyers
• Dallas Business Lawyers
• Denver Business Lawyers
• Houston Business Lawyers
• Los Angeles Business Lawyers
• New York Business Lawyers
• Phoenix Business Lawyers
• San Diego Business Lawyers
• Tampa Business Lawyers

Partnership Agreement lawyers by city

• Austin Partnership Agreement Lawyers
• Boston Partnership Agreement Lawyers
• Chicago Partnership Agreement Lawyers
• Dallas Partnership Agreement Lawyers
• Denver Partnership Agreement Lawyers
• Houston Partnership Agreement Lawyers
• Los Angeles Partnership Agreement Lawyers
• New York Partnership Agreement Lawyers
• Phoenix Partnership Agreement Lawyers
• San Diego Partnership Agreement Lawyers
• Tampa Partnership Agreement Lawyers

ContractsCounsel User

Dental partnership agreement

Location: texas, turnaround: less than a week, service: contract review, doc type: partnership agreement, page count: 15, number of bids: 2, bid range: $625 - $1,000, user feedback:, entertainment network contract, location: georgia, service: drafting, number of bids: 6, bid range: $250 - $1,750, want to speak to someone.

Get in touch below and we will schedule a time to connect!

Find lawyers and attorneys by city

Partnership Agreement: What Is It And Do You Need One?

Expert Reviewed

Updated: Jun 18, 2024, 8:46am

If you’re starting a business with one or more partners, you want to get on the same page and be clear upfront about how the business is going to operate—and how you’ll share the money you make. The best way to do that is through a legal document called a partnership agreement.

What is a Partnership Agreement?

A partnership agreement is a legal document that dictates how a small for-profit business will operate under two or more people.

The agreement lays out the responsibilities of each partner in the business, how much of the business each partner owns, and how much profit and loss each partner is responsible for. It also includes rules about how you’ll manage the business and addresses potential scenarios that could affect the business, such as death of a partner or how a partner can leave the company.

The purpose of a partnership agreement is to get in writing answers to common questions that could arise in the business, so you and your partner(s) don’t find yourselves at odds down the line.

Featured Partners

ZenBusiness

$0 + State Fees

Varies By State & Package

On ZenBusiness' Website

Northwest Registered Agent

$39 + State Fees

On Northwest Registered Agent's Website

Tailor Brands

$0 + state fee + up to $50 Amazon gift card

Varies by State & Package

On Tailor Brands' Website

$0 + State Fee

On Formations' Website

Why You Need a Partnership Agreement

In the absence of a partnership agreement, your partnership’s operation will be governed by your state’s partnership laws. These laws offer a standardized approach to running a partnership and resolving common issues, but they’re not customized to your business and can lead to results you didn’t intend. For example, your partnership may have to be dissolved and re-formed if one partner decides to leave.

A partnership agreement lays the foundation for success in a business. To create an agreement, you’ll have to sit down with your partners and make clear decisions about who will play what role, how you’ll fund your business, how you’ll allocate profits and losses, and how you’ll handle new partners and departing ones. If you don’t go through this exercise, it’s easy to assume you’re all on the same page when really you have very different visions for how your business will run. The conflict this creates can set your enterprise on a course for failure.

There will always be disagreements and difficult decisions in the life of a business. A partnership helps to minimize disputes with your partners and give you clear guidelines when disagreements do arise.

Partnership Vs. Corporation

Whether you classify your business as a partnership or a corporation determines how you’ll be taxed and how much liability you have in the business.

General partnership is the default classification for any unincorporated business with multiple owners, whether there’s a written partnership agreement or not.

The partners in a general partnership are each fully liable for the company’s debts. For tax purposes, a partnership is considered a pass-through business. The partners’ report their share of company profits and losses on their personal tax returns and pay personal income tax on them. If they work in the business, they’ll also pay self-employment taxes .

A corporation, in contrast, is a business entity that’s created by filing paperwork with the state. You and fellow business owners own shares in the corporation, which has its own legal identity. Owners aren’t personally liable for a corporation’s business debts, and they may receive a salary as an employee of the corporation. Corporations are taxed differently than partnerships. They can be taxed as C corporations that pay corporate income taxes. Some small corporations can be taxed as pass-through entities by electing S corp. taxation.

What Should a Partnership Agreement Include?

Like any typical contract, your partnership agreement should include some basics:

• The business name
• Description of the business
• Contact information for the business and owners

In addition to that, include details to cover important decisions and scenarios you’ll face throughout the life of the business. At a minimum, your partnership agreement should include clauses to address:

• Ownership.  How much of the business does each partner own? This is usually expressed as a percentage interest in the business
• Decision-making.  Does every decision need to be unanimous? Which decisions will you leave to majority rule? How much weight does each partner’s vote carry (for example, based on their percentage of ownership)? Detail exactly how you’ll make decisions in the business to ensure all voices are heard fairly and that no partner can question the validity of decisions after the fact.
• Capital contribution.  How much will each partner put in to start and run the business? Will contributions be cash, property, or services? If the business needs more money down the road to continue operating, what is each partner’s responsibility — or, will you close your doors if you run out of cash?
• Profits and distributions.  How will you allocate profits and losses among the partners? Detail when and how partners should be repaid for their contributions, and when and how they’ll receive distributions from profits.
• Death and disability.  What happens if a partner dies or becomes unable to continue operating the business? Who inherits their share of the company, and does the new owner(s) also inherit their responsibilities or decision-making rights? Do the other partners have a right to buy out the departing partner’s interest? Include this clause to prepare your business for the unexpected as well as to think long-term about the possibility of your business outliving its founders.
• Withdrawal or addition of a partner.  If anyone wants to leave the partnership, how can they do that? What happens to their share and decision-making rights? How will the business absorb their operational and fiscal responsibilities? What’s the procedure for admitting new partners and allocating profits, losses and responsibilities to them? It’s vital to define these terms now, while the partners are in good standing, in case you’re on bad terms when these scenarios comes up.

Frequently Asked Questions (FAQs)

What's the difference between a partnership agreement and an operating agreement.

A partnership agreement and an operating agreement are very similar in what they define: ownership and investment stakes, division of profits and losses, and so on. However, a partnership agreement is used in partnerships, while operating agreements are used in LLCs.

What are the four types of partnership?

Partnerships are classified according to how they distribute liability among partners, as follows:

• General partnership (GP): Each partner has total liability for all of the business’s financial and legal obligations, including obligations caused by another partner’s actions.
• Limited partnership (LP): At least one partner (the “general partner”) has total liability, while one or more “limited partners” (usually investors) have limited liability.
• Limited liability partnership (LLP): Each partner has total liability for business obligations but is protected from liabilities due to other partners’ conduct. LLPs are typically reserved for professionals like doctors, lawyers and accountants, and are only available in some states.
• Limited liability limited partnership (LLLP): Operates like an LP, but the general partner also has limited liability. LLLPs are not available in all states, and their liability protection has not been thoroughly tested in court.

What are the characteristics of a partnership?

To legally be considered a partnership, a business relationship must:

• Include two or more people
• Be contractual (oral or written)
• Involve a business
• Be for-profit
• Extend liability to partners
• Not create a separate entity

Can you write your own partnership agreement or do you need a lawyer?

You can find partnership agreement samples, templates and guidance through your state’s bar association’s website, through the Small Business Administration resource SCORE , or from private companies such as Rocket Lawyer and LegalZoom.

Where can I find a partnership agreement template?

You can find partnership agreement samples, templates and guidance through your state’s bar association’s website, through the Small Business Administration resource Score, or from private companies such as Rocket Lawyer and LegalZoom.

• Best LLC Services
• Best Registered Agent Services
• Best Trademark Registration Services
• Top LegalZoom Competitors
• Best Business Loans
• Best Business Plan Software
• ZenBusiness Review
• LegalZoom LLC Review
• Northwest Registered Agent Review
• Rocket Lawyer Review
• Inc. Authority Review
• Rocket Lawyer vs. LegalZoom
• Bizee Review (Formerly Incfile)
• Swyft Filings Review
• Harbor Compliance Review
• Sole Proprietorship vs. LLC
• LLC vs. Corporation
• LLC vs. S Corp
• LLP vs. LLC
• DBA vs. LLC
• LegalZoom vs. Incfile
• LegalZoom vs. ZenBusiness
• LegalZoom vs. Rocket Lawyer
• ZenBusiness vs. Incfile
• How To Start A Business
• How to Set Up an LLC
• How to Get a Business License
• LLC Operating Agreement Template
• 501(c)(3) Application Guide
• What is a Business License?
• What is an LLC?
• What is an S Corp?
• What is a C Corp?
• What is a DBA?
• What is a Sole Proprietorship?
• What is a Registered Agent?
• How to Dissolve an LLC
• How to File a DBA
• What Are Articles Of Incorporation?
• Types Of Business Ownership
• 7 Partnership Advantages In 2024

What Is SNMP? Simple Network Management Protocol Explained

What Is A Single-Member LLC? Definition, Pros And Cons

What Is Penetration Testing? Definition & Best Practices

What Is Network Access Control (NAC)?

What Is Network Segmentation?

How To Start A Business In Louisiana (2024 Guide)

Dana Miranda is a Certified Educator in Personal Finance® who's been writing about money management and small business operations for more than a decade. She writes the newsletter Healthy Rich about how capitalism impacts the ways we think, teach and talk about money. She's the author of YOU DON'T NEED A BUDGET (Little, Brown Spark, 2024).

With over a decade of editorial experience, Rob Watts breaks down complex topics for small businesses that want to grow and succeed. His work has been featured in outlets such as Keypoint Intelligence, FitSmallBusiness and PCMag.

Our Recommendations

• Best Small Business Loans for 2024
• Businessloans.com Review
• Biz2Credit Review
• SBG Funding Review
• Rapid Finance Review
• 26 Great Business Ideas for Entrepreneurs
• Startup Costs: How Much Cash Will You Need?
• How to Get a Bank Loan for Your Small Business
• Articles of Incorporation: What New Business Owners Should Know
• How to Choose the Best Legal Structure for Your Business

Small Business Resources

• Business Ideas
• Business Plans
• Startup Basics
• Startup Funding
• Franchising
• Success Stories
• Entrepreneurs
• The Best Credit Card Processors of 2024
• Clover Credit Card Processing Review
• Merchant One Review
• Stax Review
• How to Conduct a Market Analysis for Your Business
• Local Marketing Strategies for Success
• Tips for Hiring a Marketing Company
• Benefits of CRM Systems
• 10 Employee Recruitment Strategies for Success
• Sales & Marketing
• Social Media
• Best Business Phone Systems of 2024
• The Best PEOs of 2024
• RingCentral Review
• Nextiva Review
• Ooma Review
• Guide to Developing a Training Program for New Employees
• How Does 401(k) Matching Work for Employers?
• Why You Need to Create a Fantastic Workplace Culture
• 16 Cool Job Perks That Keep Employees Happy
• 7 Project Management Styles
• Women in Business
• Personal Growth
• Best Accounting Software and Invoice Generators of 2024
• Best Payroll Services for 2024
• Best POS Systems for 2024
• Best CRM Software of 2024
• Best Call Centers and Answering Services for Busineses for 2024
• Salesforce vs. HubSpot: Which CRM Is Right for Your Business?
• Rippling vs Gusto: An In-Depth Comparison
• RingCentral vs. Ooma Comparison
• Choosing a Business Phone System: A Buyer’s Guide
• Equipment Leasing: A Guide for Business Owners
• HR Solutions
• Financial Solutions
• Marketing Solutions
• Security Solutions
• Retail Solutions
• SMB Solutions

Business News Daily provides resources, advice and product reviews to drive business growth. Our mission is to equip business owners with the knowledge and confidence to make informed decisions. As part of that, we recommend products and services for their success.

We collaborate with business-to-business vendors, connecting them with potential buyers. In some cases, we earn commissions when sales are made through our referrals. These financial relationships support our content but do not dictate our recommendations. Our editorial team independently evaluates products based on thousands of hours of research. We are committed to providing trustworthy advice for businesses. Learn more about our full process and see who our partners are here .

Business Partnership Agreement Writing Guide

Every partnership needs a formal agreement. We'll show you what it should include.

Table of Contents

Since joining Business News Daily in 2015, Adam Uzialko has become a trusted resource for small businesses. As our Small Business Insider and an entrepreneur, he has spent thousands of hours researching and writing about the software and services entrepreneurs need most.

A business partnership agreement is a document that establishes clear business operation rules and delineates each partner’s role. These agreements are enacted to resolve disputes, delineate responsibilities, and define how to allocate profits and losses . 

Any business partnership in which two or more people own a stake in the company should have a business partnership agreement. This legal document provides critical guidance in a company’s operations.

We’ll explore what a business partnership should include, as well as share resources and best practices for creating this critical legal document.

What is a business partnership agreement?

A business partnership agreement is a legal document between two or more business partners that spells out the business’s legal structure and purpose. It outlines the following information: 

• Individual partners’ responsibilities
• Capital contributions
• Partnership property
• Each partner’s ownership interest
• Decision-making conventions 

The agreement also outlines what steps will be taken if one business partner decides to sell their interest or leave the company and how the remaining partner or partners would split profits and losses.

“I highly suggest formal partnership agreements are put in place as businesses evolve from solo practices into a partnership or ensembles,” said Rich Whitworth, former head of business consulting for Cetera Financial Group. “The biggest reason is that it establishes the ‘rules of engagement’ between the business and its owners … and lays out a road map on how to deal with entity-level issues.”

While businesses seldom begin with concerns about a future partnership dispute or how to dissolve the business, business partnership agreements are essential in situations in which emotions might otherwise take over. A written, legally binding agreement is an enforceable document instead of a spoken agreement between partners.

How to write a business partnership agreement

A business partnership agreement must include all foreseeable issues regarding the business’s co-management. The easiest way to prepare a business partnership agreement is to hire an attorney or to find a customizable template. If you’re writing your own agreement, find a template for a company that’s similar to the business you’re starting .

A business partnership agreement should follow a logical process and include the following information:

• Business generalities. Start by stating the business’s name , its legal structure and the business’s location (i.e., which state’s laws will govern it).
• Business operations. State the partnership’s purpose, and explain the activities the business will and will not engage in.
• Ownership stake. Spell out the percentage of the business that each partner owns. Enumerate each partner’s rights and responsibilities.
• Decision-making process. Outline how decisions are made and the responsibility of each partner in the decision-making process . Include who has financial control of the company and who must approve the addition of new partners. Also include information on how profits and losses are distributed among the partners.
• Liability. If the business partnership is set up as an LLC, the agreement should limit the liability each partner faces in the event of a business lawsuit . To do so effectively, a partnership agreement should be paired with other documents, such as articles of incorporation . A business partnership agreement alone is likely not enough to fully protect the partners from liability.
• Dispute resolution. Any business partnership agreement should include a dispute-resolution process. Even if you’re working with family or best friends, disagreements are common in business.
• Business dissolution. If one or more partners choose to dissolve the business, a business partnership agreement should outline how that dissolution will occur. It should spell out the procedures for partners to join or leave the partnership. It should also outline continuity or succession planning for partners leaving the business.
• Explain how the partnership’s finances (including small business taxes ) will be managed.

Once you’ve spelled out everything in detail, each partner must sign the agreement for it to take effect. 

The stages of a business partnership agreement

A business partnership agreement doesn’t have to be set in stone, especially as a business grows and develops. You’ll be able to add to the agreement, especially if unforeseen circumstances occur. According to Whitworth, there are four primary stages to consider.

• Initial partnership: This stage involves creating the initial business partnership agreement as described above. You’ll draft an agreement that governs the business’s general operations, decision-making process, ownership stakes and management responsibilities.
• Addition of limited partners: As a business grows, it might have the opportunity to add new partners. According to Whitworth, the original partners might agree to a “small carve-out of minor equity ownership” for the new partner, as well as limited voting rights that give the new partner partial influence over business decisions.
• Addition of full partners: Sometimes you’ll want to promote a limited partner to a full business partnership. A business partnership agreement should include the requirements and process for elevating a limited partner to full partner status, complete with full voting rights and influence equal to that of the original partners.
• Continuity and succession: At some point, founders may retire or leave the company without wanting to dissolve it. If you didn’t include continuity and succession planning initially, it’s crucial to outline your plan. Describe how ownership stake and responsibilities will be distributed among the remaining partners after the departing partners take their leave.

“Partnership agreements need to be well crafted for myriad reasons,” said Laurie Tannous, owner of law firm Tannous & Associates Inc. “One main driver is that the desires and expectations of partners change and vary over time. A well-written partnership agreement can manage these expectations and give each partner a clear map or blueprint of what the future holds.”  

Free business partnership agreement templates

Business partnership agreement templates are available for free online. These resources can help you draft your agreement, but you should have legal counsel review your draft and help you revise and finalize the document before you sign it. 

Once a lawyer confirms that your business partnership agreement is thorough and legally binding, you and your partners can sign it to make it official.

When you’re searching for business partnership agreement templates, start with the following resources: 

• LegalTemplates.net
• LegalContracts.com
• TemplateLab

Business partnership agreement mistakes to avoid 

Partnership agreements are complex documents. Unfortunately, many people get bogged down in details and make crucial startup mistakes in their partnership agreement. 

Here are some common mistakes to avoid: 

• Skipping key details. Partnership agreements typically include some complex language around specific topics, and people may leave out this language if they don’t understand it. Don’t assume something isn’t necessary just because it reads like fine print.
• Trusting things will work out. People tend to go into business with people they like and trust, leading them to think there won’t be problems later. A partnership agreement exists to resolve these issues when they inevitably arise.
• Not having the agreement reviewed by counsel. Partnership agreements can vary by state and industry, and laws and best practices are constantly changing. If you choose not to have an attorney draft your agreement, at least have one review it before you sign the document.
• Not amending the agreement later. Partnerships evolve, and governing documents must be updated periodically to reflect the changing business. Otherwise, there may be issues that the document can’t resolve.
• Not forming separate partnerships for new ventures. Creating a business is expensive and time-intensive. Sometimes when a partner has an idea for a new business, their first thought is to make it part of their existing partnership. However, this keeps partners from compartmentalizing their liability. Often, their existing partnership agreement isn’t structured to govern new and different businesses.

Business partnership agreements formalize the relationship between partners and enumerate their rights and responsibilities. This limits partner liability and helps resolve disputes. Failing to draft an appropriate agreement can lead to problems later, including significant personal liability.

Why do you need a business partnership agreement?

A business partnership agreement establishes a set of agreed-upon rules and processes that owners sign and acknowledge before problems occur. If any challenges or controversies arise, the business partnership agreement defines how to address them.

“A business partnership is just like a marriage: No one goes into it thinking that it’s going to fail, but if it does fail, it can be nasty,” said Jessica LeMauk, marketing director at Voxtur. “With the right agreements in place, which I’d always recommend be written by a qualified attorney, it makes any potential problems of the business partnership much more easily solved and/or legally enforceable.” 

In other words, a business partnership agreement protects all partners if things go sour. By agreeing to a clear set of rules and principles at the partnership’s outset, partners exist on a level playing field developed by consensus and backed by law.

Business partnership agreements level the playing field

A well-crafted, airtight business partnership agreement clarifies each partner’s expectations, duties and obligations. In business, things change constantly, so it’s crucial to establish a business partnership agreement that can serve as a grounding force in turbulent or uncertain times. A business partnership agreement also defines how the business should grow and governs the addition of new partners.

If you’re going into business with a partner, establish a business partnership agreement while incorporating as an entity. Even if it seems unnecessary today, when an issue arises, you’ll be glad you had an agreement in place.

Dock Treece contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.

Building Better Businesses

Insights on business strategy and culture, right to your inbox. Part of the business.com network.

How to Create a Business Partnership Agreement

4 min. read

Updated October 25, 2023

If you plan on going into business with a business partner, a written partnership agreement is important. If you and your partners don’t spell out your rights and responsibilities in a written business partnership agreement, you’ll be ill-equipped to settle conflicts when they arise, and minor misunderstandings may erupt into full-blown disputes. In addition, without a written agreement saying otherwise, your state’s law will control many aspects of your business.

• How a partnership agreement helps your business

A partnership agreement allows you to structure your relationship with your partners in a way that suits your business. You and your partners can establish the shares of profits (or losses) each partner will take, the responsibilities of each partner, what will happen to the business if a partner leaves, and other important guidelines.

Uniform partnership act

Each state (with the exception of Louisiana) has its own laws governing partnerships, contained in what is usually called the “Uniform Partnership Act” or the “Revised Uniform Partnership Act”—or, sometimes, the “UPA” or the “Revised UPA.” These statutes establish the basic legal rules that apply to partnerships and will control many aspects of your partnership’s life, unless you set out different rules in a written partnership agreement.

Don’t be tempted to leave the terms of your partnership up to these state laws. Because they were designed as one-size-fits-all fallback rules, they may not be helpful in your particular situation. It’s much better to put your agreement into a document that specifically sets out the points you and your partners have agreed on.

• What to include in your partnership agreement

Here’s a list of the major areas that most partnership agreements cover. You and your partners-to-be should consider these issues before you put the terms in writing:

• Name of the partnership. One of the first things you must do is agree on a name for your partnership. You can use your own last names, such as Smith & Wesson, or you can adopt and register a fictitious business name, such as Westside Home Repairs. If you choose a fictitious name, you must make sure that the name isn’t already in use.
• Contributions to the partnership. It’s critical that you and your partners work out and record who’s going to contribute cash, property, or services to the business before it opens—and what ownership percentage each partner will have. Disagreements over contributions have doomed many promising businesses.
• Allocation of profits, losses, and draws. Will profits and losses be allocated in proportion to a partner’s percentage interest in the business? And will each partner be entitled to a regular draw (a withdrawal of allocated profits from the business) or will all profits be distributed at the end of each year? You and your partners may have different ideas about how the money should be divided up and distributed, and each of you will have different financial needs, so this is an area to which you should pay particular attention.
• Partners’ authority. Without an agreement to the contrary, any partner can bind the partnership without the consent of the other partners. If you want one or all of the partners to obtain the others’ consent before binding the partnership, you must make this clear in your partnership agreement.
• Partnership decision-making. Although there’s no magic formula or language for divvying up decisions among partners, you’ll head off a lot of trouble if you try to work it out beforehand. You may, for example, want to require a unanimous vote of all the partners for every business decision. If that seems like more than will be necessary, you can require a unanimous vote for major decisions and allow individual partners to make minor decisions on their own. In that case, your partnership agreement will have to describe what constitutes a major or minor decision. You should carefully think through issues like these when setting up the decision-making process for your business.
• Management duties. You might not want to make ironclad rules about every management detail, but you’d be wise to work out some guidelines in advance. For example, who will keep the books? Who will deal with customers? Supervise employees? Negotiate with suppliers? Think through the management needs of your partnership and be sure you’ve got everything covered.
• Admitting new partners. Eventually, you may want to expand the business and bring in new partners. Agreeing on a procedure for admitting new partners will make your lives a lot easier when this issue comes up.
• Withdrawal or death of a partner. At least as important as the rules for admitting new partners to the business are the rules for handling the departure of an owner. You should therefore set up a reasonable buyout scheme in your partnership agreement to deal with this eventuality.
• Resolving disputes. If you and your partners become deadlocked on an issue, do you want to go straight to court? It might benefit everyone involved if your partnership agreement provides for alternative dispute resolution, such as mediation or arbitration.

Have you gone into business with a partner, and did you write up an agreement beforehand? What would you have done differently? Share your stories or questions with us in the comments.

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

Nolo's mission is to make the legal system work for everyone—not just lawyers. What we do: To help people handle their own everyday legal matters—or learn enough about them to make working with a lawyer a more satisfying experience—we publish reliable, plain-English books, software, forms and this website.

Table of Contents

Related Articles

17 Min. Read

The Legal Requirements to Start a Small Business in the UK Explained

6 Min. Read

How and Where to Obtain Business Licenses and Permits

3 Min. Read

3 Reasons Why You Shouldn’t Wait to Register for a DBA

9 Min. Read

How to Legally Register for Your Business Name

The LivePlan Newsletter

Become a smarter, more strategic entrepreneur.

Your first monthly newsetter will be delivered soon..

Unsubscribe anytime. Privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

• Start free trial

Start selling with Shopify today

Start your free trial with Shopify today—then use these resources to guide you through every step of the process.

The 8 Elements of Business Partnership Agreement

A business partnership agreement is a legal document that specifies how two or more people operate a business together and how the profits are divided.

Two heads are better than one, as the saying goes. And in no context is this truer than in business. Going into business with one or more partners has lots of benefits: pooled resources, diversity of ideas, and shared liability, to name a few. However, it’s important that partners are on the same page about key elements of the business, including respective responsibilities, areas of oversight, and each partner’s contribution. Having a well-constructed business partnership agreement between you will clarify and formalize answers to these critical issues.

What is a business partnership agreement?

A business partnership agreement is a legal contract governing an arrangement between two or more parties to operate a business together and share in the partnership’s business profits. A partnership entity subject to a business partnership agreement can take several forms, including the following:

General partnership 

General partnerships are the simplest form of partnership, in that two or more owners agree to combine forces to run a business and share in its profits (and losses). It functions like a multi-person sole proprietorship. The profits flow directly to the partners, who are taxed at their personal income rates. Also like sole proprietors , general partners share personal liability for the business’s debts or legal judgments.

Limited partnership

A common structure in small businesses such as retailers, a limited partnership (LP) is an entity made up of at least one general partner and one or more limited partners. The difference from a general partnership is that, in a limited partnership, the limited partner is only liable for the business’s debts and legal judgments based on their ownership share (or a lesser or greater amount, if agreed to in a business partnership agreement). 

Limited liability partnership (LLP) 

LLPs are pass-through entities that enjoy the same tax benefits as general partnerships, along with a higher degree of liability protection for partners, who are not liable for debts or damages incurred by the business due to another partner’s conduct. In this way, the LLP is similar to a limited liability company ( LLC ).

Professional limited liability partnerships (PLLP) 

PLLPs are essentially LLPs comprised of partners who bear some kind of professional license—such as an accounting firm, law firm, or health care provider, for example. These exist because it is illegal in some states for licensed professionals to operate LLPs. All partners in LLPs must provide proof of licensure to operate the business lawfully.

What is the purpose of having a business partnership agreement?

A business partnership agreement formalizes all the partnership affairs and terms of business operation. Having these partnership details written down in one place and explicitly signed off on by all partners is crucial for helping avoid disputes—or at least minimizing their impact on the business. Aside from laying out each partner’s role, other important reasons for having a business partnership agreement on file include:

Ownership stake

A business partnership agreement establishes how much each partner has invested in the business and the amount each can expect to take in profit share.

A business partnership agreement outlines the percentages of partners’ authority, which usually translates to how much influence they have in making business decisions. For example, if one partner owns 65% of the partnership, that partner will likely have decision-making precedence over the other, who only owns 35%.

Liability 

For limited partnerships, LLPs, and PLLPS, a business partnership agreement can designate the proportion of liability each partner shares in the business.

A business partnership agreement will contain instructions for other partners to follow in the event one or more partners decides to retire or dies while the business is still operating.

8 elements of a business partnership agreement

• Basic company information
• Investment plan
• Delegation of powers and partners’ participation
• Profit allocation
• Partnership property
• Dispute resolution process
• Protocols for termination
• Protocols for onboarding

No two partnerships—or business partnership agreements—are alike. Any partnership agreement should be tailored to fit the specific and unique needs of individual partnerships, as well as the individual partners within a partnership. Still, certain basic principals are present across companies and industries. Eight elements that all business partnerships agreements should contain are:

1. Basic company information 

This includes the partnership’s name, location, names of individual partners, agreement effective date, and other basic information needed by tax authorities to officially recognize your business.

2. Investment plan 

Investment details lay out the size of each partner’s capital contributions to the partnership funds, and how often these contributions will be made.

3. Delegation of powers and partners’ participation

This section typically outlines who makes decisions for the partnerships and how (for example, by vote according to partnership interest). It should also discuss which business partners handle specific areas of business operations, such as who will keep the books and who will be responsible for day-to-day operations.

4. Profit allocation

The part of the agreement on profit allocation addresses what share of the business profits each individual partner can expect to take home, and at what frequency. This usually reflects the percentage of the business each partner owns.

5. Partnership property

This includes what equipment, assets, or real property each partner is bringing to the business, and how that would adjust each partner’s interest.

6. Dispute resolution process 

Because a business partnership agreement exists in large part to avoid or minimize conflicts, it ideally contains detailed language outlining how disputes between partners are handled. You might mandate that all partners first seek to resolve disputes through mediation, for example, before resorting to litigation. Or, it may define the governing law where any such litigation might take place (such as a specific state court where the business is headquartered).

7. Protocols for termination 

Since some conflicts may be irreconcilable, business partnership agreements should outline procedures for terminating members who breach their duties. This section can also include procedures for how partners handle the death of another partner while the business is still in operation. For example, remaining partners may pay out the deceased partner’s interest to heirs, according to their ownership share in the business.

8. Protocols for onboarding

Your agreement indicates whether new partners will be allowed, and if so, how they will be brought onto the partnership.

How to create a business partnership agreement

There are three approaches you can take to create a business partnership agreement. They are:

• Collaborate with partners. Collaborate with partners to draft a business partnership.
• Assign independent tasks. Assign one or more partners to take on the task before allowing other partners to offer notes or propose amendments. 
• Hire a lawyer. Engage a lawyer to write an initial draft, then allow legal representation for each prospective partner to review the terms individually. 

Once all partners have come to a consensus on terms, each should sign and retain a copy of the entire agreement. All further amendments to the agreement after signature must be subsequently agreed to by all partners. Usually written consent is required.

Business partnership agreements FAQ

Can a business partnership agreement be customized to fit the specific needs of a business.

Yes. In fact, a business partnership agreement should be customized to fit the specific needs of a business. All partnerships are different. Some consist of only two equal partners; others contain many partners with various levels of ownership of the business. Although certain fundamental elements should be included in every business partnership agreement, the extent of (or inclusion of) certain terms will depend entirely on the specifics of the business.

Can I write my own business partnership agreement?

Yes, you can write your own business partnership agreement—but it’s important that all partners have the opportunity to read, assess, and offer any revisions to the partnership contract before signing. Given how complex contract negotiations can become, you may wish to consult the services of an attorney in drafting and/or negotiating and amending the agreement.

What happens if a business partner wants to leave the business before the end of the agreement?

Your business partnership agreement should lay out procedures for how to offboard a partner who wishes to leave the business, and outline contingencies for continuity and succession in the event a partner retires or dies. For example, you might agree to require a withdrawing partner to provide 90 days written notice before divesting from the partnership; or, you might agree to pay out the heirs of a deceased partner in accordance with their ownership interest.

Can you terminate a business partnership agreement?

Yes, you can terminate a business partnership agreement. You can outline a predetermined date for termination in the agreement itself, such as five years from the date of signature, which can always be extended by subsequent agreement of the partners. You can also outline causes for termination—such as the circumstances in which a partner’s breach of their fiduciary duties to the business could result in their removal from the partnership.

What makes a business partnership agreement legal?

A business partnership agreement functions like any other legal contract or formal agreement. Certain foundational elements of a contract law must be fulfilled for it to be enforceable. These include mutual assent among the partners, usually some kind of monetary investment, and a presumption that all partners were competent and of sufficient mind to sign a legally binding document.

Keep up with the latest from Shopify

Get free ecommerce tips, inspiration, and resources delivered directly to your inbox.

By entering your email, you agree to receive marketing emails from Shopify.

popular posts

The point of sale for every sale.

Subscribe to our blog and get free ecommerce tips, inspiration, and resources delivered directly to your inbox.

Unsubscribe anytime. By entering your email, you agree to receive marketing emails from Shopify.

Learn on the go. Try Shopify for free, and explore all the tools you need to start, run, and grow your business.

Try Shopify for free, no credit card required.

• Credit cards
• View all credit cards
• Banking guide
• Loans guide
• Insurance guide
• Personal finance
• View all personal finance
• Small business
• Small business guide
• View all taxes

You’re our first priority. Every time.

We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.

So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners .

Partnership Agreement: What It Is and How to Create One

Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

Table of Contents

The importance of having a partnership agreement

What to include, how to create a partnership agreement.

A partnership agreement is a legal document that outlines the management structure of a partnership and the rights, duties, ownership interests and profit shares of the partners. It’s not legally required, but highly advisable, to have a partnership agreement to avoid conflicts among partners.

When you go into business with other people, the hope is that you’ll always work well together as a team. That's not always the case, however. One key to protecting any type of business entity is to have a solid founders’ agreement.

For partnerships, a founders’ agreement is called a partnership agreement. This article explains why a business partnership agreement is important, what you should include in your agreement — and how to create an agreement that’s effective and legally binding for all partners.

» MORE: NerdWallet's best online legal services for small businesses

LLC Formation

$0 + state fees  

A partnership agreement is a foundational document for a business partnership and is legally binding on all partners. It sets up the partnership for success by clearly outlining the business’s day-to-day operations and the rights and responsibilities of each partner. In this way, a partnership agreement is similar to corporate bylaws or a limited liability company’s (LLC) operating agreement.

There’s no state that requires a partnership agreement, and it’s possible to start a business without one. Some partners only have an oral agreement or jot down something quickly in a notebook to establish their partnership (recall all those “back of the napkin” movie scenes?). We recommend that you launch a business only after all partners sign a written, comprehensive partnership agreement. You should store the signed agreement along with other important business records.

Customize the rules for your partnership

In the absence of a partnership agreement, your state’s standard statutes on partnerships will apply. Most states have adopted the Revised Uniform Partnership Act (RUPA). The RUPA might contain provisions that aren’t suitable for your company. For example, under the RUPA, partners are entitled to an equal division of profits even if they’ve contributed different amounts of capital to the company. Some state statutes also will terminate a partnership’s existence if one or more partners leaves the company. With a partnership agreement, you can customize these and other provisions in a way that’s most appropriate for your business.

Prevents conflicts among partners

There are numerous reasons why partners might get into disagreements with each other. If you start a business with a friend or family member, you might realize that your personalities clash as business partners. One partner might not carry their weight in handling business responsibilities. It’s also common for feelings of resentment to arise when one partner contributes most of the money to the partnership, while the other contributes labor, also known as “sweat equity.”

A partnership agreement clearly outlines what each partner is responsible for and what they’re contributing to the partnership. It also specifies how important business matters are to be decided (e.g. how much of a vote each partner gets), so conflicts are less likely.

Handle business changes more easily

Changes in a partner’s life or in the wider market for your product or service can cause growing pains for a business. A new partner might want to join your business, or a partner might want to enter into a major business deal that will affect the company. A partnership agreement will address the admission of new partners and the types of actions partners can take.

Likewise, death, illness, divorce or retirement might cause a partner to leave the business.

Under some state laws, a partnership ends whenever one or more partners decides to leave the business. But most small-business owners want to see their company continue prospering even if they die, become disabled or otherwise leave the business. To make transitions easier, you can include a provision in your partnership agreement to allow remaining partners to buy out the exiting partner’s ownership interest in the company.

A partnership agreement should be customized for the specific needs of every business. We recommend using a legal template or consulting a business lawyer to draft your agreement. They’ll make sure that your partnership agreement complies with state laws and contains provisions that are most relevant to your company. The statutes in different states impact what you can customize and change with a partnership agreement.

A service like LegalZoom has lawyers licensed in every state standing by to help you launch your partnership and write up your partnership agreement.

Type of partnership

It’s important to have a partnership agreement no matter what type of partnership you have — general partnership, limited partnership (LP) or limited liability partnership (LLP). In a few states, there’s one more type of partnership called a limited liability limited partnership (LLLP). You’ll need to specify the type of partnership because the structure and features of each partnership are very different.

For instance, a limited partnership includes two types of partners — limited partners and general partners. General partners are personally liable for all the debts and obligations of the partnership. Limited partners are liable only up to the extent of their investment in the company.

Business name and address

This is pretty straightforward. You’ll want to include your partnership’s legal name, any fictitious business name/DBA that you’re operating under and business address. If your company has multiple locations, list out all the locations and identify the headquarters.

Partnership purpose and start date

In this section, provide a short overview of your company’s main product or service. You can leave this section pretty general because that will give you the flexibility to pivot and launch new products and services as your company grows. The agreement should also mention the start date of the partnership.

Partner information and contributions

Don’t forget to include each partner’s name and address in your agreement. You also should include the capital contributions of each partner, both the nature of the contributions (i.e. money, property, labor, etc.) and their value. If you have an LP, identify which partners are limited partners and which partners are general partners.

Management and control

This is perhaps the most important section of your partnership agreement. Here, you lay out each partner’s ownership interest in the business and their profit shares. These might be, but don’t need to be, equal to each other. For instance, one partner might contribute 70% of a business’s resources. Another partner might contribute just 30% of a business’s resources but bring most of the market knowledge and skills. In that case, the partners might find it fair to establish a roughly equal split of the profits.

Meetings and voting rights

Under most state laws, corporations must have regular board of director and shareholder meetings. Partnerships aren’t required to do this, but setting up a meeting schedule can help keep business matters well organized. We suggest choosing a monthly or quarterly meeting schedule and outlining the topics that will be discussed in each meeting, what constitutes a quorum for meetings and the voting rights of each partner. If you’re in a two-partner business, avoid 50/50 voting rights. Even though an even split might seem equitable, it’s often a recipe for a stalemate.

With a limited partnership, you should identify what types of issues (if any) the general partners will need to get approval for from the limited partners. Normally, limited partners don’t participate in the daily operations of the business. However, some state statutes give limited partners authority to vote on issues that affect the structure of the partnership, such as the admission of new partners or a sale of the company’s assets.

Partner liabilities

The hallmark of a general partnership is that partners share unlimited personal liability for the debts and obligations of the business. This means that, in most states, someone with a legal claim against the partnership can sue any or all general partners. Later, the general partners can sort out among themselves who’s responsible for what losses as outlined in the partnership agreement. Usually, profits and losses are allocated according to the same percentages.

Travis Crabtree, the president and general counsel of online business filing company Swyft Filings , says, “Partners can agree amongst themselves that one person is only responsible for a certain percentage of the losses. However, if the person who promised to be responsible for 80% of the liabilities, for example, cannot pay, then the person who is owed money can seek recovery from the other general partners regardless of whatever arrangement the general partners have among themselves.”

New partners and exits

Every business undergoes changes over time, and new partners might want to join the company while old partners leave. The partnership agreement should deal with both situations. An individual might become a partner, for instance, by investing capital in the company or by buying the ownership interest of an existing partner. Usually, the admission of a new partner also requires a majority vote of the current partners. You’ll need to decide if a minimum contribution is required for someone to become a partner and the partner’s profit and loss share and entitlement to distributions.

Partner exits can be as complicated as new partners entering the company. Take the example of a partner who passes away. The partner’s will might bequeath their ownership share to an heir, but the heir might have no aptitude for the business. A partnership agreement often includes buyout provisions that allow remaining partners to purchase an outgoing partner’s interest in the company. Outgoing partners (or their estates in the case of a death) are entitled to a return of any capital they invested in the company.

Finally, you’ll need to decide the grounds for dissolution of the business, though naturally, this isn’t a topic that partners like to discuss. If a certain number of partners exit the business, will this dissolve the partnership? Do all partners have to agree to dissolution or is a majority vote enough? This is an important section of your partnership agreement.

Partner compensation

Partners receive compensation in exchange for their participation in the business. They don’t receive a salary like corporate employees, but they receive a distribution or draw from the company’s profits instead. Partnership agreements can also provide for guaranteed payments, which are periodic payments that partners receive without regard to the profitability of the business (similar to a salary).

The partnership agreement should specify when partners will receive distributions and guaranteed payments. For example, the partners might agree that the business should reach a certain level of profitability first. The partnership needs to fill out IRS Form 1065 each year and give a Schedule K-1 to each partner. Partners use Schedule K-1 to report their share of business income and profits on their personal tax returns.

Non-disclosure and non-compete clauses

Small-business owners should consider putting non-disclosure agreements (NDAs) or non-compete clauses in their partnership agreement. NDAs prohibit partners from disclosing confidential information about the partnership. Non-competes have to be reasonable in time and scope but prevent a partner from starting a closely competing business or soliciting partners for a competing business.

Revisions and choice of law

A partnership agreement needs to stand the test of time, but a business goes through many changes. That is why business partners should allow the agreement to be revised as needed. In most cases, the agreement can be changed by a majority or three-quarters vote. If the partnership agreement is tested in court, you should also specify which state’s laws will apply.

Source: Rocket Lawyer

One of the biggest mistakes that small-business owners make is not having a partnership agreement, so if you’ve come this far, you’re already at an advantage. There are many resources for creating your partnership agreement.

If you have a pretty simple business situation, we recommend following an online template, such as this Rocket Lawyer partnership agreement template . Rocket Lawyer will walk you through some questions step-by-step until your partnership agreement is ready to go. The agreement will also be customized for your state.

In more complex situations, we suggest consulting a business lawyer for help. There’s no substitute for personalized legal advice. For example, if you have more than two partners or if your partnership has a high amount of assets, it’s probably best to get the help of a lawyer. A lawyer is best qualified to ensure that your agreement reflects in legal terms what you and your partners might have agreed to verbally. LegalZoom has lawyers licensed in every state to help you launch your partnership and draft your partnership agreement.

Each partner must sign the partnership agreement in order for it to be binding on everyone. In most cases, electronic signatures are as good as physical signatures. You should also distribute an electronic or physical copy of the agreement for each partner to keep and store one among important business records.

» MORE: NerdWallet's best small-business apps

A version of this article was first published on Fundera, a subsidiary of NerdWallet.

On a similar note...

• Skip to primary navigation
• Skip to main content
• Skip to primary sidebar
• Skip to footer

Legal Templates

Home Partnership Agreement Small Business

Small Business Partnership Agreement Template

Use our small business partnership agreement to detail all the key information of a partnership for a small business.

Updated July 2, 2023 Written by Sara Hostelley | Reviewed by Brooke Davis

A small business partnership agreement is a written contract between partners in a small business, setting out each partner’s duties, rights, and profit sharing. It prevents misunderstandings and disputes and protects the company and its partners.

A successful small business partnership is akin to a strong relationship. Both entail not just short-term mutual benefits but long-term compatibility. You need to have the same business vision, mission, and goals. However, under the pressure of starting a new business, problems arise and can turn into major setbacks.

Therefore, a small business partnership agreement template should govern the business.

What is a Small Business Partnership Agreement?

When to use a small business partnership agreement, what to include in a small business partnership agreement, small business partnership agreement sample.

A small business partnership agreement defines the precise guidelines for a small business partnership’s successful operations and the roles each partner will play.

The partnership agreement includes how profits and losses are shared amongst the partners, how the business will run in case of a partner withdrawal, and each partner’s rights and obligations.

You should use a small business partnership agreement to form a small business partnership. A partnership agreement is a vital document in the decision-making process of a business.

The absence of such an agreement can negatively affect the decision-making process of both business partners.

For instance, if a partner withdraws from the business, guidelines should be outlined on whether the partnership should be dissolved or reformed.

There will always be conflicts and tough decision-making in the lifespan of a business. A partnership agreement helps to reduce and solve disputes between you and your partner.

Before the formation of any successful business partnership, there are crucial factors that should be put into consideration.

The following factors form the bedrock of any successful joint business:

• Decision making

It is important to note that you and your partner will not agree on everything concerning the business. Therefore, you should develop long-term solutions to dilemmas within the business.

Who needs to make the final say? Which decisions require undivided votes by the partners? You will have a peaceful business by drafting down a non-biased decision-making structure.

• Distributions

The main intention of building the business is to maximize the profits received. Your small business partnership agreement should entail how you will divide business profits and how much each partner will receive.

Your agreement should clearly describe how ownership will change in various scenarios. What happens when a partner withdraws? What are the chances of buying out or absorbing a new partner? What happens if one partner dies, retires, or goes bankrupt?

• Dispute resolution

If things fall apart between partners, how will the disagreements be resolved? Deciding how you will handle disputes sets the foundation for a friction-free business.

• Critical developments

Sometimes, the unpredictable happens, and your small business partnership agreement should address possible concerns and circumstances, such as; what happens when a partner falls sick. What are the retirement provisions?

• Dissolution

A partnership agreement should entail the steps to be taken when legally terminating the partnership. You might opt to do this after you and your partners disapprove of the future of your business.

• Contributions

Ensure you outline each partner’s role in the business formation and running of finances. In your small business partnership agreement, define what each partner brings- monetary value, time, customers, efforts, liabilities, etc.

The below small business partnership agreement template allows you to quickly fill in the blanks and get your partnership up and running. Download in PDF or Word format.

Related Documents

• Business Plan : A plan that guides you through each stage of starting and growing your business.
• Partnership Agreement Amendment : A document detailing any changes to a Partnership Agreement.
• Assignment of Partnership Interest : A legal document that transfers the rights to receive benefits from an original business partner to a new business partner.
• Business Proposal : Use this document to form new relationships with other businesses and organizations.
• Legal Resources
• Partner With Us
• Terms of Use
• Privacy Policy
• Cookie Policy
• Do Not Sell My Personal Information

The document above is a sample. Please note that the language you see here may change depending on your answers to the document questionnaire.

Thank you for downloading!

How would you rate your free template?

Click on a star to rate

End of the Year Sale: Get up to 35% Off on all our Plans.

Business Partnership Agreement Template

Navigating the modern business world is like setting sail in unpredictable waters; having a reliable compass can be a game-changer.

A business partnership agreement is that compass. It provides structure and security for all parties involved, allowing you to focus on what truly matters: the success of your business.

What is a Business Partnership Agreement?

A business partnership agreement is a legal document outlining each partner’s roles, responsibilities, and financial contributions within a business arrangement. This comprehensive contract is typically established between two or more business owners, forming a safeguard to ensure a harmonious, productive relationship.

The primary purpose of this agreement is to protect all parties involved. It clarifies matters ranging from dispute resolution and capital contributions to profit distribution and amendments. Detailing each partner’s role and expectations can prevent potential misunderstandings, fostering a healthier and more productive business partnership.

Without such an agreement, the business might fall under your state’s default rules, which may not be in the best interest of your partnership. This document serves as a tangible representation of each partner’s understanding, forming the bedrock of your collaborative business endeavor.

DISCLAIMER : We are not lawyers or a law firm and we do not provide legal, business or tax advice. We recommend you consult a lawyer or other appropriate professional before using any templates or agreements from this website.

When to Use a Business Partnership Agreement Template

A business partnership agreement template should be used when entering a business partnership. It’s not only for large corporations but also small businesses and startups. It’s relevant in various industries- technology, food service, or manufacturing. A partnership agreement is essential if two or more individuals collaborate to start or run a business.

One significant advantage of using a template is its simplicity and speed of the process. A template can be a lifesaver, especially when you’re not familiar with the ins and outs of legal language. It provides the basic framework, highlighting the essential elements in your agreement, ensuring you pay attention to important details.

For instance, imagine you’re opening a bakery with a friend. With a business partnership agreement template , you can clearly define your roles—who’ll manage supplies, who’ll handle the baking, how profits will be shared, etc. This transparency will help maintain harmony, facilitate growth, and mitigate potential disputes, ensuring your bakery thrives.

Perhaps you are an artist collaborating with a gallery owner. A partnership agreement can explicitly state the percentage of sales each party receives and detail responsibilities such as marketing and promotion, hosting exhibitions, and artwork transportation.

Similarly, for real estate developers planning a joint venture, a partnership agreement can clarify profit sharing, capital contributions, property acquisition, development duties, and how potential losses would be handled.

These scenarios illustrate the broad applicability of partnership agreements and the ease of a well-structured template.

Download our Partnership Agreement

The implications of not using a business partnership   agreement with partners can be catastrophic to your business. That’s why we’ve created a simple template to help protect your business.

What to Include in a Partnership Agreement Template

When entering into business partnerships, having a clearly defined agreement is critical. Without a precise understanding of each partner’s role within the association and the expectations for both parties to fulfill, you may find yourself in a compromising and overwhelming situation down the line.

A partnership agreement template can provide this clarity by adhering to best practices for accountability and reliability between parties—but what should it include?

Below are some essential factors you should consider when creating your tailored partnership agreement template.

Business Information

The agreement should commence with the basic business information. It should clearly mention the legal name of the business, the type of business (e.g., limited liability company, limited liability partnership agreement,  etc.), the business address, and any other significant details that identify the business.

For instance, if you’re establishing an innovative tech startup, your agreement should clearly state your company name, address, and the fact that you’re in the technology industry.

It’s vital to outline the primary purpose of your business as it helps delineate the boundaries of your operations, providing a clear focus for your partnership.

Partner Information

Understanding who you’re shaking hands with is equally important. Include comprehensive information about each partner, covering their full names, addresses, and contact details.

Beyond the basic partnership details, the agreement should also discuss why the partnership is being formed. Is it for specific expertise, financial contributions, or network access? Make this clear to underline the value each partner brings to the table. For example, if you’re partnering with an industry veteran for their experience and vast network, that should be highlighted here.

Your partnership is not a timeless saga; it needs a defined timeline. This section details the duration of the partnership—when it will start and the circumstances under which it will end.

In some cases, the partnership could be indefinite, continuing until a specific event occurs, such as the retirement or death of a partner or the achievement of a particular goal. Others might have a predetermined end date. Make sure to clarify this upfront to prevent future uncertainty.

Capital Contributions

Nothing can stir the pot of disagreement like money . Therefore, the partner capital contributions of each partner need to be explicitly outlined in your agreement.

This section should include the amount of money, property, or services each partner will contribute to start the business and any expected future contributions. Moreover, the document should clarify how these contributions affect the ownership percentages of each partner.

For example, suppose Partner A contributes $70,000, and Partner B contributes $30,000 to the business. In that case, the agreement might state that Partner A owns 70% of the company while Partner B owns 30%. This reflects their initial capital investments– which may fluctuate over time. 

Roles & Responsibilities

In business partnerships, clarity is the key to a pleasant journey. Clearly defining each partner’s roles and responsibilities can help avoid confusion and disputes in the future. Include who makes day-to-day decisions, oversees employee management, and deals with financial affairs.

For example, in a software development firm, one partner might handle technical aspects while the other manages marketing and customer relations.

It’s not enough to define the roles; responsibilities tied to these roles should also be clearly outlined. This ensures accountability, keeps partners focused, and contributes to the efficient functioning of the business.

Admitting New Partners

Growth often means expansion, which may involve admitting new business partners to the association. Your agreement should include a clause that outlines the process for adding other business partners.

Will it require unanimous consent, or will a majority vote suffice? What will be their capital contributions and ownership share? Spell out these details to streamline any future additions to your business partnership.

Amendments to the Agreement

The business world is dynamic, and your partnership agreement should be flexible enough to accommodate changes. Specify how modifications to the contract can be made.

Will all partners need to agree, or will amendments be made based on majority voting? Providing a straightforward amendment process will ensure your agreement remains relevant and applicable over time.

Dispute Resolution

Even the best business relationships can encounter turbulent waters. Disputes might arise, and having a dispute resolution procedure in place can prevent these disagreements from capsizing your partnership.

Consider including provisions for mediation or arbitration instead of litigation, which can be costly and time-consuming.

Withdrawal or Death

Unfortunate events, such as a partner’s withdrawal or death, should be considered when drafting your partnership agreement.

Provide clear guidelines on what will happen under these circumstances. Will the business continue, or will it dissolve? How will the departing partner’s share be valued and disbursed?

Dissolution

While it’s not something any business partnership wants to consider, preparing for all possibilities, including dissolution, is crucial.

Outline under what circumstances the partnership may dissolve, such as a partner’s retirement or project completion. Specify the process for winding up the business, settling debts, and dividing assets. 

Don’t forget to detail what happens if partners disagree on dissolution. You could require mediation or use a predetermined formula to buy out a partner’s ownership interest.

Voting Rights

Every partner’s voice matters, and the agreement must ensure fair representation of each one.

Voting rights are usually proportional to a partner’s share in the business, but you can also set them equally regardless of capital contribution. Decide whether all decisions need unanimous consent or if a majority is sufficient.

Profit & Loss Distribution

This is the heart of the economic engine that drives your partnership. Establish an explicit formula for distributing profit and loss among partners. It could be equal shares or proportionate to capital contributions or work hours. You might also consider how often distributions occur and what happens in the case of a loss. Be as transparent as possible to prevent future disputes.

Tax & Accounting Information

Here’s where many businesses stumble—financial administration. Identify who is responsible for maintaining the books and handling tax filings. Specify the fiscal year-end and when financial reports are due. Also, consider including a clause that allows partners to inspect financial records upon request.

Remember, these are guidelines, not hard-and-fast rules. Your business is unique, so your partnership agreement should also be. Don’t hesitate to tailor it to your needs. When it’s time to put ink to paper (or, in this digital age, e-signature to PDF), Signaturely is there to help. Secure, efficient, and legally binding, the e-signature solution ensures that closing your business agreement is as smooth as the journey we’ve taken through this guide.

Tips for How to Write a Business Partnership Agreement

Embarking on a business partnership is exciting, but you must ensure the journey is smooth. Here are some handy tips for crafting a comprehensive and transparent partnership agreement:

• Discuss, Discuss, Discuss: Before you even start writing, have thorough conversations with your partners about each aspect of the business. Be open, honest, and ensure everyone’s expectations align.
• Avoid Legal Jargon: Keep the language straightforward so all partners understand the content. If technical terms are necessary, provide definitions.
• Details Matter: Don’t leave anything to assumption. Being explicit prevents future conflicts, whether it’s about duties, dispute resolution, or profit distribution.
• Consider Future Changes: Businesses evolve, and so do partnerships. Include clauses that address possible future scenarios like accepting new partners or buying out existing ones.
• Use an E-signature Platform: An e-signature tool like Signaturely can simplify the process once your agreement is ready. E-signatures save time, provide a secure platform, and gives you a legally binding signature— without the guesswork.

Download our Business Partnership Agreement

Faqs about business partnership agreements.

Below are some of the common questions people have about partnership agreements.

Yes, you can. While getting legal advice is a good idea for complex partnerships, many straightforward agreements can be self-drafted using templates and guidelines.

A simple partnership agreement should include basic details like business information, business partner roles and responsibilities, capital contributions, profit & loss distribution, and provisions for disputes, amendments, and dissolution.

Forming a partnership involves discussing and agreeing on the terms of the partnership, writing and signing a partnership agreement, and registering the partnership with the appropriate government agency .

The simplest form is a general partnership where two or more partners share responsibilities, profits, and liabilities equally.

When signed by all parties, a partnership agreement is legally binding. It can be used in court to resolve disputes. However, the enforceability of specific sections within the contract may vary depending on your state’s regulations.

While starting a partnership without a contract is possible, it’s not advisable. A partnership agreement provides clarity, sets expectations, and protects all partners.

What You Need to Remember About Partnership Agreement Templates

Going through the partnership journey doesn’t have to be a turbulent endeavor. A well-drafted partnership agreement forms a solid foundation, providing clarity, averting misunderstandings, and setting the stage for harmonious cooperation. Infuse it with transparency, detail, flexibility, and legal validity, and you have an agreement that protects and propels your business forward. 

This process becomes even more streamlined with the right tools, such as Signaturely. Remember, your partnership agreement is more than a document; it’s the roadmap to your shared entrepreneurial journey. Embrace it as a necessary step in your path toward collective business success.

Business Partnership Contractual Agreement

• This Business Partnership Contractual Agreement (hereinafter referred to as the “Agreement” ) is entered into on ________________ (the “Effective Date” ), by and between ________________________, with an address of ________________ (hereinafter referred to as the “First Partner” ) and ________________ with an address of ________________ (hereinafter referred to as the “Second Partner” ) (collectively referred to as the “Partners” ).

PARTNERSHIP PURPOSE

The Partners agree that the purpose of this partnership is ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

• The Partners agree that the partnership will begin on the date of signing this Agreement and will continue until its termination.

BUSINESS LOCATION

The Partners agree that the location of the business will be at ________________________ and any change to the location of the business will only occur by providing an attached amendment to this Agreement signed by the Partners.

NEW PARTNERS

The Partners agree that no new partners may be added to this Agreement and partnership.

CAPITAL CONTRIBUTIONS

• The Partners agree to the following capital contributions in case or in property or other forms of contributions. 

• The Partners agree that there will be no interest on any capital payment by either of the partners including any additional capital contributions made. 

PROFITS AND LOSSES

• The Partners agree that the appointed accountants will be responsible to determine the profits and losses of the partnership. 
• The profits and losses will be determined in accordance with the Partners capital contribution values as examined and deduced by the appointed accountants at the end of every fiscal year.

BORROWING OF PARTNERSHIP INTERESTS

• The Partners agree that no money will be borrowed from the business without the prior written consent of the other partner.

FINANCIALS STATEMENTS

• The Partners agree to provide a financial statement at the end of every fiscal year showing the income and expenses of the business indicating and providing each partner’s share of the profits.

The Partners agree that their voting weight is determined as follows: ______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

• The Partners agree that the business will be managed as follows:

______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

• The Partners agree that meetings will occur at the headquarters of the Partnership or in any other place as agreed by the Partners.

Calling of Meetings

• The Partners are entitled to call for a meeting by providing a reasonable notice beforehand.
• The Partners agree that in case of death of either of the partners, the surviving partner will be entitled to purchase the interest of the decedent in the partnership from the heirs and/or assigns. 
• The Partners also agree that the surviving partner will be entitled to terminate this Agreement and partnership. 

TERMINATION

• The Partners agree that this Agreement and partnership may be terminated as follows _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
• The Partners agree that any amendments made to this Agreement must be in writing where they must be signed by both Partners to this Agreement. 
• As such, any amendments made by the Partners will be applied to this Agreement.

SEVERABILITY

In an event where a provision of this Agreement is found to be void and/or unenforceable by a court of competent jurisdiction, then the provisions remaining will continue to be enforced.

DISPUTE RESOLUTION

• Any dispute and/or difference arising out of or related to this Agreement will be submitted to ________________ (Arbitration/mediation/negotiation) according to, and subject to the laws of ________________.

GOVERNING LAW

• This Agreement will be governed by and construed according to the laws of

ENTIRE AGREEMENT

• This Agreement is complete and with respect to the subject matter herein, supersedes all and any prior agreements, understandings, and conditions, expressed or implied, written or oral, of any nature with respect to the subject matter herein. 
• The expressed terms control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms herein.

Signature And Date

The Partners hereby agree to the terms and conditions set forth in this Agreement and such is demonstrated throughout their signatures below:

FIRST PARTNER

SECOND PARTNER

Related Proposals and Templates

• Intellectual Property Agreement Template
• Non-Disclosure Agreement Template
• Service Agreement Template
• Payment Agreement Template

The implications of not using a business partnership agreement with partners can be catastrophic to your business. That’s why we’ve created a simple template to help protect your business.

© 2024 Signaturely

• Privacy Policy
• Terms and Conditions
• Cookie Statement

How does it work?

1. choose this template.

Start by clicking on "Fill out the template"

2. Complete the document

Answer a few questions and your document is created automatically.

3. Save - Print

Your document is ready! You will receive it in Word and PDF formats. You will be able to modify it.

Partnership Agreement

Rating: 4.8 - 2,740 votes

What is a partnership agreement?

A partnership agreement is a contract between two or more individuals who would like to manage and operate a business together to make a profit . Each partner shares a portion of the partnership's profits and losses, and each partner is personally liable for the debt and obligations of the partnership.

What are the types of partnerships?

There are two different kinds of partnerships that can be formed. The most common type of partnership is the general partnership . In a general partnership, all business partners have total liability, participate in managing the business, and have the ability to agree to business contracts and loans on behalf of the business. Ownership interests (i.e., how much of the business each partner owns) and profits in a general partnership are usually split evenly between the partners.

The other form of partnership is the limited partnership . Limited partnerships have at least one general partner who controls the business' day to day operations and is personally responsible for the debt of the business, as well as one or more passive partners who are known as limited partners . Limited partners contribute investment money to the business, but have minimal control over daily business decisions and operations. Limited partnerships are most often set up by companies that invest money in other businesses or real estate. In exchange for ceding management power and control, a limited partner's personal liability is solely limited to the amount they invested in the business. The limited partner's investment can be used to pay off partnership debts, but their personal assets cannot be touched to pay off the debts of the business.

What is the difference between a partnership and a limited liability company (LLC)?

When two or more people enter into a business, they form a partnership by default without needing to file any formal paperwork or have a written agreement. By contrast, establishing an LLC involves business owners filing formal articles of organization with their state's LLC filing office, as well as complying with other state filing requirements.

Another major difference between these two business structures is that partners in a partnership are personally liable for any business debts of the partnership. This means that any creditors to whom the partnership owes money may go after all the partner's personal assets. Members of an LLC are not personally liable for the company's debts and liabilities.

Is it mandatory to have a partnership agreement?

No, it is not mandatory to have a partnership agreement to start a legal business partnership. There are no formal requirements to create a general partnership, which means that it is not necessary for anything to be put down in writing for the partnership to form.

Though there is no requirement for a written partnership agreement, it is highly advisable that one be created . This document acts as a critical foundational document for running a new business and serves to set the business up for success by ensuring clear communication and defined responsibilities for all the partners.

What is a "capital contribution"?

A capital contribution is the money, services, property, and other resources that are initially contributed to the partnership by each of the partners.

What is an "ownership interest"?

The ownership interest is the percent of the partnership's assets, earnings, and other value owned by each partner.

What must a partnership agreement contain?

A valid partnership agreement must contain at least the following mandatory clauses:

• Partnership name: This is the legal name under which the Partnership will do business.
• Purpose of the partnership: The document includes a brief description of the business that the partnership will conduct.
• Partner information: The agreement has all the legal names and addresses of all the partners currently involved in the partnership.
• Capital contributions: There is a clause describing the cash, property, services, and other resources initially contributed to the partnership by each of the partners.
• Ownership interest: This describes the percent of the partnership owned by each of the partners.
• Profit/Loss distribution: The agreement outlines how the profits and losses of the partnership will be distributed between the partners, often based on capital contributions and/or ownership interest, and how often this distribution will take place.
• Management and voting requirements: This is a description of how the partnership will be managed, how voting weight will be determined, and whether unanimous or majority votes will be required to make important decisions about the finances and operations of the partnership.
• Partner addition and withdrawal: These are guidelines for how the partnership will handle the addition of partners, the voluntary withdrawal of partners, and the involuntary withdrawal of partners.
• Partnership dissolution: This outlines the circumstances under which the partnership can be dissolved and a description of how the remaining assets of the partnership will be divided between the partners if the partnership is dissolved.

What are the prerequisites of a partnership agreement?

Before creating and filing a partnership agreement, the partners should select and register the name of the partnership . The name of the business should be unique and comply with any specific requirements in the jurisdiction where the partnership is being registered. The partners should check with the city or county clerk's office to see whether the desired name is already on the list of businesses operating within the jurisdiction.

Who can enter into a partnership agreement?

The primary requirement to enter into a partnership agreement is that the person have the legal capacity to enter into a contract . This means that the person is of legal age, 18 years old or older in most jurisdictions, and has the mental capacity to understand the contract they are signing. Both individual people and legal entities, such as corporations, trusts and estates, LLCs, and other partnerships, can enter into a partnership agreement. Foreign nationals may enter into a partnership agreement as long as they have the appropriate immigration status to allow them to work and engage in business activities in the United States.

Who cannot enter into a partnership agreement?

Minors under the age of 18 years old may not enter into a partnership unless they have been emancipated by a court.

Individuals or entities who are currently engaged in bankruptcy proceedings are often restricted from entering into new partnerships.

What has to be done once the partnership agreement has been written?

Once this document is complete, all the partners should sign and date the document . The document does not need to be notarized or witnessed to be legally binding.

Creating a partnership agreement is just the first step in forming a partnership. After the agreement has been drafted, to register a partnership, the partners must f ile additional documents depending on the state in which they are located . To learn more, please consult the appropriate state department website in the state where the business is located to determine any additional requirements.

Which laws are applicable to a partnership agreement?

Partnership Agreements are subject to the laws of individual states . There is no one federal law covering the requirements for a Partnership Agreement. This is because each individual state governs the businesses formed within that state.

How to modify the template?

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.

Guides to help you

• How to Sell your Business
• How to Choose the Best Legal Structure for your Business
• How to Transfer Business Ownership
• Frequently Asked Questions about Business Partnerships
• Going out of Business: Ending or Dissolving a Partnership

Partnership Agreement - FREE - Template - Word and PDF

Country: United States

Business Structure - Other downloadable templates of legal documents

• Articles Of Organization
• Shareholder Agreement
• Articles Of Incorporation
• LLC Membership Interest Assignment
• Business Sale Agreement
• Corporate Bylaws
• Stock Sale and Purchase Agreement
• LLC Membership Purchase Agreement
• Founders' Agreement
• Business Merger Agreement
• Limited Partnership Agreement
• Other downloadable templates of legal documents

This site uses cookies to deliver and enhance the quality of its services and to analyze traffic.

Partnership Agreement Template

Strengthening collaboration with a business partnership agreement.

In the dynamic realm of business development, strategic collaborations play a crucial role in harnessing collective strengths, accessing new markets, and driving innovation. A Business Partnership Agreement stands as the cornerstone of such collaborations, establishing a legal structure that outlines the framework for partnership operations between entities.

This agreement is an essential instrument, meticulously detailing the roles and contributions of each partner, the distribution of profits and losses, governance structures, and the mechanisms for resolving disputes. It not only orchestrates the operational conduct of the partnership but also safeguards each party's interests, fostering an environment of mutual trust and cooperation. This contract goes beyond mere transactional interactions; it is about creating a robust alliance that leverages the unique capabilities of each partner to achieve shared strategic objectives.

What is a Business Partnership Agreement Template?

A Business Partnership Agreement template serves as a comprehensive blueprint that spells out the essential elements required to establish and govern a business partnership. This includes specifying the nature of the business, the capital contribution by each partner, profit sharing ratios, management duties, and procedures for adding new partners or exiting the partnership. Utilizing a template ensures a thorough approach to crafting the agreement, allowing for adaptability to the specific needs of the partnership while promoting a clear, mutual understanding of the terms and obligations involved.

Key Elements of a Business Partnership Agreement

A robust Business Partnership Agreement should thoroughly address:

• Identification of Parties - Clearly identifies all partners involved and their respective roles within the partnership.
• Capital Contributions - Details the initial contributions, whether cash, assets, or services, provided by each partner and how additional contributions will be handled.
• Distribution of Profits and Losses - Defines how profits and losses are distributed among partners, typically in proportion to their initial contributions or as agreed in the partnership agreement.
• Management and Voting Rights - Outlines the governance structure, including who will manage day-to-day operations and how decisions will be made, often based on voting rights proportional to ownership interests.
• Duties and Obligations of Partners - Specifies the responsibilities of each partner, ensuring that all are accountable for contributing to the partnership’s success.
• Terms of Dissolution - Establishes the conditions under which the partnership can be dissolved, detailing the processes for winding down affairs and distributing assets.
• Dispute Resolution - Includes provisions for handling internal conflicts, typically through mediation or arbitration, to avoid litigation and ensure continuity.

Supporting Documents for Structuring a Business Partnership Agreement

To enhance the functionality and comprehensiveness of a Business Partnership Agreement, integrating related documents is advisable:

• Amendment Agreement - Facilitates changes to the original agreement as the business evolves.
• Buy-Sell Agreement - Outlines the procedures for buying out partners’ interests or selling the partnership interest, crucial for handling transitions smoothly.
• Non-Disclosure Agreement (NDA) - Protects sensitive business information shared between partners.
• Partnership Dissolution Agreement - Specifies the terms and conditions for dissolving the partnership, ensuring clarity and fairness.

Why Employ a Detailed Template for a Business Partnership Agreement?

Utilizing a detailed template for drafting your Business Partnership Agreement offers significant benefits:

• Risk Mitigation - Reduces potential legal disputes by clearly defining roles, responsibilities, and profit-sharing agreements.
• Customizability - Allows for tailoring the agreement to accommodate the specific dynamics of the partnership and the industry context.
• Efficiency - Streamlines the agreement preparation process, saving time and resources that can be better focused on strategic initiatives.
• Strengthened Partnership - Promotes transparency and mutual understanding, laying a strong foundation for long-term collaboration.

Adopting a comprehensive Business Partnership Agreement is crucial for navigating the complexities of joint business ventures. It provides a clear, enforceable framework that aligns partners with their collective goals, ensuring that the partnership operates smoothly and remains resilient in the face of challenges. This fundamental document not only facilitates operational efficacy but also solidifies the partnership’s commitment to shared success and strategic growth.

Updated in April 2024

Related documents

3,000+ templates & tools to help you start, run & grow your business, all the templates you need to plan, start, organize, manage, finance & grow your business, in one place., templates and tools to manage every aspect of your business., 8 business management modules, in 1 place., document types included.

Small Business Partnership Agreement Template

Used 5,333 times

3.2 Rating ( 5 reviews)

This small business partnership agreement template can be used by two companies who wish to form a joint venture with one another.

e-Sign with PandaDoc

Prepared by:

​ [PartnerA.FirstName] [PartnerA.LastName] [PartnerA.Company] ​

Prepared for:

​ [PartnerB.FirstName] [PartnerB.LastName] ​ [PartnerB.Company] ​

This small business partnership agreement, entered into on [Document.CreatedDate] is by and between the following entities:

​ [PartnerA.Company] ​ [PartnerA.StreetAddress] [PartnerA.City] [PartnerA.State] [PartnerA.PostalCode] ​ [PartnerA.Phone] ​

​ [PartnerB.Company] ​ [PartnerB.StreetAddress] [PartnerB.City] [PartnerB.State] [PartnerB.PostalCode] ​ [PartnerB.Phone] ​

Unlimited templates & signatures for 19$/month

By signing below, the listed individuals certify that they have full authority to represent the partners to this agreement, and hereby enter into this small business partnership agreement.

​ [PartnerA.Company] ​ [PartnerA.FirstName] [PartnerA.LastName] ​

​ [PartnerB.Company] ​ [PartnerB.FirstName] [PartnerB.LastName]

Care to rate this template?

Your rating will help others.

Thanks for your rate!

Useful resources

• Featured Templates
• Sales Proposals
• NDA Agreements
• Operating Agreements
• Service Agreements
• Sales Documents
• Marketing Proposals
• Rental and Lease Agreements
• Quote Templates
• Business Proposals
• Agreement Templates
• Purchase Agreements
• Contract Templates

• Newsletters
• Best Industries
• Business Plans
• Home-Based Business
• The UPS Store
• Customer Service
• Black in Business
• Your Next Move
• Female Founders
• Best Workplaces
• Company Culture
• Public Speaking
• HR/Benefits
• Productivity
• All the Hats
• Digital Transformation
• Artificial Intelligence
• Bringing Innovation to Market
• Cloud Computing
• Social Media
• Data Detectives
• Exit Interview
• Bootstrapping
• Crowdfunding
• Venture Capital
• Business Models
• Personal Finance
• Founder-Friendly Investors
• Upcoming Events
• Inc. 5000 Vision Conference
• Become a Sponsor
• Cox Business
• Verizon Business
• Branded Content
• Apply Inc. 5000 US

Inc. Premium

How to Structure a Partnership

Partnerships are incredibly common--and incredibly hard to sustain. here's how to set up a partnership that is equitable, efficient, and mutually rewarding..

When two or more people start a business or carry on a trade together to turn a profit, the result can often be a strong union that blends complementary skills, financial resources, customers and connections to help the venture succeed. But, sometimes, such relationships can sour, the business can fail, and the parties can decide to go their separate ways. In the eyes of the law, by the very nature of entering into business with another party, you may be considered a partnership -- whether you have a written agreement or not. It's best to follow certain legal and practical steps to structure this relationship so that it is a win-win for all concerned.

The number of business partnerships in the U.S. has been growing steadily by an annual rate of about 5.6 percent a year to more than 3 million in 2007, according to the most recent records reported by the U.S. Internal Revenue Service. The total net income for these partnerships has also been on the rise, increasing by 2.5 percent from 2006 to a total $683 billion for 2007, IRS figures show. With that much money at stake, it's important for partnerships to spell out what each person contributes, whether in terms of financing, property, labor or customers, and what each person expects in terms of profits and ownership. A partnership agreement can be solidified by an oral agreement between partners, but experts recommend putting the terms down in writing. "I liken the partnership agreement to a prenup negotiated before a marriage," says Barbara Weltman, a tax and business attorney and author of such books as J.K. Lasser's Small Business Taxes (Wiley 2009). "When everybody loves each other and has the best of intentions, it's a good idea to work out the 'what ifs.' You want to decide in advance who is getting what, who is doing what, who is responsible for what, and how to resolve disagreements -- what happens if one person wants to retire or one partner wants to expand and the other doesn't?" The following pages will cover the benefits and disadvantages of a partnership, how to structure a partnership in a written agreement to protect yourself and the business, and steps you need to take in forming a partnership. Why Form a Partnership? Once you have an idea for a company, whether this means selling a product or a service, understand the consequences of opting to become a partnership. As a business partner, you need to be prepared to devote time, use business methods, and get set up properly so you can make more money, minimize taxes, and generally avoid potential problems. Here are the pros and cons of forming a business partnership: Benefits of a partnership

• This type of business entity is easy and inexpensive to set up. There are no formal or legal steps required in forming a partnership, unlike forming a corporation, for which you have to file with your state government. As long as you join with at least one other person and have the intention of making a profit from your business, you are automatically a general partnership, Weltman says.
• Filing income tax returns is easy. A general partnership is a "pass through" entity, meaning the partners -- and not the partnership -- are taxed individually. That means that the partnership return is merely an information return, telling the IRS about the partnership's income and expenses; the partners pay tax on their share of partnership income on their personal returns.
• It's a way to attract prospective employees or "talent." A business potentially can reach new heights when complementary skill sets are gathered under a partnership. A partnership can also serve as an incentive to attract new employees if they realize they may become partners at some point.

Disadvantages of a partnership

• Perhaps the biggest drawback is that each partner is jointly and severally liable for the debts and obligations of the business. "A creditor can sue a single partner for all of the partnership debt owed and this partner is responsible for paying the full amount to the creditor," Weltman says. Once a partner pays off the creditor, he or she can seek "contribution" from the other partner(s).
• All your personal assets are potentially at risk. This is why some attorneys, such as Cliff Ennico, nationally syndicated small business columnist and author of Small Business Survival Guide (Adams Media 2005), suggest that you are better off incorporating your business or forming a limited liability company (LLC) rather than structuring it as a partnership. Incorporating can help shield personal assets if your business is sued, or if your business partner is sued.
• Any asset you contribute to the partnership is jointly owned by you and your partners, and there's no assurance you will get it back when the partnership is dissolved.
• Profits that a business makes under a partnership must be shared with others.
• Unlike in a corporation, you may not be able to deduct some employee benefits from business income on tax returns.
• Any time you share decision-making responsibilities with other parties; there is the potential for disagreements. Partners are co-owners and that means they share management and financial control over the business.

Dig Deeper: The Pros and Cons of Business Partnerships  

Structuring a Business Partnership: Who Qualifies?

The first step you need to take in forming a business partnership is to figure out who is in the partnership. Partnerships can be formed with two or more partners, although Ennico points out that partnerships with large numbers of partners (more than 10) can become unwieldy to manage. Professional firms with 50 or more partners have extremely detailed agreements spelling out rigid procedures over who gets admitted, who signs the lease, the structure of the partnership, etc. "It can get very involved," Ennico says. Partners can include employees, spouses, family members, or associates. There may be reasons arguing against including a spouse as a partner; for example, if you transfer title to your personal assets into your spouse's name to protect your personal property in the event the partnership is sued, the spouse cannot have any involvement in the partnership business whatsoever, according to Ennico.

If you are teaming up with someone else to perform services for a mutual client (for example, a website developer who subcontracts the design work to another consultant) and do not with to make that person your formal business partner, make sure the other person signs an agreement stating clearly that they are not your partner or agent.  Ennico further recommends that you notify the client in writing or by e-mail that you are NOT in partnership with that person.  Otherwise, Ennico says there's a risk the client may view you as partners and will hold both of you accountable as such if something goes wrong.

Dig Deeper: 10 Questions to Ask a Potential Business Partner

Structuring a Business Partnership: General or Limited?

There are two types of partnerships. Which one is the right kind for you?

• General partnerships are formed when two or more people agree to enter into business together to make a profit. You don't even need to put anything in writing (although you should) or file any type of notice with state or local authorities. The feature that distinguishes this from other business arrangements -- and makes it a dangerous business form -- is the joint and several liability of the partners. That means each partner is liable for any debts of the partnership or of any partners on behalf of the business. "Try to avoid forming a partnership," Ennico says. "The operating agreement for a Limited Liability Company (LLC) contains almost all the same provisions as a partnership agreement, and the cost is about the same."
• Limited partnerships are a variation, in which a business partnership is comprised of at least one general partner and one limited partner. "The limited partner gets this name because he or she enjoyed limited personal liability," Weltman says. "The extent of exposure for partnership debts is essentially the limited partner's investment in the partnership." The limited partner is a silent partner, contributing money to the venture but without any right to direct how it operates or otherwise being involved in the running of the partnership business.  Also, a limited partnership can only be formed by creating a formal agreement in accordance with state law and filing certain documents with your state Secretary of State's office.  In a handful of states, you may also need to publish a "notice of formation" in local newspapers.

Dig Deeper: How to Choose the Right Legal Structure  

Structuring a Business Partnership: Writing a Business Plan

While this exercise is not mandatory, it is extremely helpful to ensure success of a partnership. "The plan serves as a roadmap for the partnership to implement actions necessary to start up and grow the company," Weltman says. "It also is useful in making you focus on various aspects of the business, such as where you plan to obtain start-up capital and whether you will be selling through the Web." A business plan should describe the responsibilities of each partner for the business, including who will be the head or managing partner.

Structuring a Business Partnership: Choosing a Name

Finding the right name for your business can describe what the business is all about. "Frequently, the fact that the business is a partnership is explained by the name, such as Wang and Williams Associates," says Weltman. "Other times, the name may relate to the product or service being offered by the partnership." After choosing the name, you need to protect it. Do this by making sure a suitable Internet domain name is available for your partnership, as most businesses these days should establish a website. Even if you don't set up a website immediately, reserve the name by registering your site. Check availability of the name you want to use through Register.com or other domain name providers. You will also need to register your partnership name with a local government, for which there is usually a modest fee. And while it's not required, it's often a good idea to gain legal protection for your partnership in the form of a trademark. Learn about trademark protection from the U.S. Patent and Trademark Office .

Dig Deeper: Advice on Naming Your Business

Structuring a Business Partnership: Understanding Your Tax Obligations

A business partnership does not pay taxes on income. The partnership is a pass-through entity and the individual partners pay tax on their distributive share of partnership income passed through to them. Each year, the partnership files a return, Form 1065, to report to the IRS the income, gains, losses, deductions, and credits from the business, Weltman says. It also files a Schedule K-1 for each partner, allocating a share of each item of income, deductions, etc. according to the terms of the partnership agreement. Similar reporting may be required at the state level. Each partner reports his or her share of income on Schedule C of his or her personal income tax Form 1040. If the partnership is profitable, each partner must pay self-employment taxes on his or her net earnings. These taxes cover the employer and employee share of Social Security and Medicare taxes. Because a partner is not an employee (a partner is a self-employed person), there is no withholding from a paycheck to cover income and self-employment taxes. Instead, these taxes are paid through quarterly estimated tax payments. There are special rule for husband-wife ventures. If a married couple operates a venture in which each materially participates and they file a joint return, they can opt not to file Form 1065. Instead, they can file a single Schedule C (the form used by sole proprietors) to report their share of business income and expenses.

Dig Deeper: How to Reduce Your Small Business Tax Bill

Structuring a Business Partnership: Other Details

Weltman says to make sure to deal with various other business matters before your partnership begins operations:

• Obtain a federal employer identification number. A new partnership must obtain a federal employer identification number (EIN). This can be done instantaneously and at no cost from the IRS .  When partners exit the partnership, or new partners are added, your partnership may need to obtain a new EIN as it is considered a "new" partnership for tax purposes.
• Obtain licenses and permits. Depending on your type of business, the partnership and/or each partner may be required to have a license or permit to operate legally.
• Choose a location. Decide the "official" address for the partnership. With technology enabling partners to work from remote locations, it is helpful to designate one place to receive partnership mail. If partners operate from their respective homes, the partnership can obtain an address from such companies as a UPS Store or a virtual office.
• Obtain insurance. Because each partner's personal assets are exposed to the claims of the partnership's creditors, the best way to obtain protection is to carry adequate insurance for the unexpected. Discuss these and other types of coverage with an insurance agent: property and liability coverage, auto insurance, and health coverage.

Structuring a Business Partnership: Writing the Partnership Agreement

General partnerships can be informal, oral arrangements to share profits and losses of a business venture. However, it is highly advisable to use a formal, written partnership agreement to spell out how income, deductions, gains, losses, and credits are to be split. If the agreement is silent, then state law is used to fill in gaps -- and that could leave a lot of decisions up to the courts if you and your partner(s) have a falling out. "Legally, you're not required to have a written partnership agreement but I think you're a fool not to have one," Ennico says. "If you don't have a written agreement, a judge looks at the partnership statute and that acts as your agreement."

That may be fine. But it may also not be so good, Ennico says, because the partnership laws in many states assume that all partners are equal. "If we set up a partnership on a handshake and agree to split the business 70-30, and we then have a falling out because you think you are working harder than I am and deserve a bigger share of the profits, the law may say we are 50-50 partners unless we can clearly document in writing, for example a signed Form 1065, our intent to create an unequal split," Ennico says.

Laws vary by state. There are sample partnership agreements available on legal websites on the Internet, such as Law Depot and LegalZoom . But a partnership agreement can be put in writing by a lawyer for between $500 to $1,000 and that might very well be worth the investment to your business, Ennico says. "Never undertake a partnership agreement without an attorney," he says. "I once handled an agreement involving a 20-member engineering firm that consisted of 90 pages plus schedules.  It took more than six months for the partners to reach agreement on all the details."

Here are some critical elements to include in a partnership agreement:

1. Partnership information.

• List the name of the partnership, location, when it was formed and the purpose of the business. • Who the partners are and their capital contributions • Determine who the partners are and list them, their addresses, and Social Security Numbers. Then detail what the partners are putting into the partnership. These contributions may include money, intellectual property, customers, machinery, vehicles, etc.

2. Profit and loss distribution.

Each partner's "distribution percentage" – reflecting their share of partnership profits and losses – must be clearly stated in the agreement. Partners share in the profits and losses to the extent of their share in the business. If each contributes 50 percent of the start-up money, then each is entitled to 50 percent of the profits, according to Weltman.  Ennico adds, "distributions of profit must be made in accordance with the partners' percentages – if you don't do that, there's a risk that the partnership tax laws may rearrange your percentages to reflect how much money you and your partners are actually taking out of the partnership checking account. 3. Rules concerning voting, admitting new partners, and management.

Determine who is going to manage the partnership, who can sign contracts, and whether partners are going to be receiving salaries for labor or services. "Unlike distributions of profit, salaries do not have to be made proportionately to the partners," says Ennico.  "I frequently see situations where unequal partners decide to take equal salaries for the work they're doing to further the partnership business."  You also need to determine the voting rights of the partners --  normally a simple majority vote of the partners decides what happens and what doesn't, but you can agree that important decisions be made by a "supermajority" vote of two-thirds or more of the partnership percentages.. "For example, many partnership agreements require that the partners be unanimous when deciding to admit new partners, merge with another company, sell part of their business, or make a bankruptcy filing," says Ennico. 

4. The exit strategy

The most important thing to spell out in a partnership agreement is your "exit strategy" if things don't go as planned and you want to get out of the partnership. "The dirty little secret is that as long as everybody gets along and everybody communicates and everybody does what they're supposed to, no one will look at the partnership agreement again," Ennico says. "The only time anyone is going to dust off the agreement and run to an attorney is when they are unhappy and want out."

This section details how to dissolve the partnership – the circumstances under which partners can withdraw, how much notice they must provide, and how the assets will be distributed. This section may also deal with other issues, such as what happens if one partner retires, goes bankrupt, becomes disabled, or dies. When such events occur, the departing partner's share of a business doesn't automatically get divided between the remaining partners. It is an asset that may be transferred by law to someone (such as a deceased partner's heirs, or to the partner's ex-spouse in a divorce proceeding) that you don't want to be partners with. If you don't want to be a partner with that "someone else", you may want to insist on a buy/sell clause that specifies that the surviving partners have the right to buy out that "someone else" in the event of a partner's death, disability, divorce, bankruptcy or retirement. If you do this, you should specify the method of determining the value of the departing partner's share.

Ennico says your partnership agreement should clearly state "who gets what" when the partnership dissolves, and spell out rules for what the partners can and cannot do afterwards:   "for example, can you still talk to your old customers? Can you take your customers with you? Are you prohibited from doing a similar business in the same geographic area as the partnership?  All these things can and should be spelled out."

5. The means of dispute resolution.

In the event that partners have disagreements, you may want to include in your partnership agreement how those agreements will be worked out. You may want to specify that partners bring disputes to mediation before arbitration, go to arbitration directly, or agree to only go to arbitration.

Dig Deeper: Why Partnerships Fail

Structuring a Business Partnership:  Recommended Resources

• Business.gov : Link to your location to find applicable requirements.
• Cliff Ennico, the small business attorney quoted in this article, has an excellent outline on the advantages and disadvantages of forming partnerships, LLCs and corporations, entitled "Demystifying the Business Organization," which is available without charge on his website.
• Internal Revenue Service : View IRS Publication 541, Partnerships, for guidance on partnership taxation.
• U.S., Small Business Administration : How to choose a business structure.

The Daily Digest for Entrepreneurs and Business Leaders

Privacy Policy

• Design for Business
• Most Recent
• Presentations
• Infographics
• Data Visualizations
• Forms and Surveys
• Video & Animation
• Case Studies
• Digital Marketing
• Design Inspiration
• Visual Thinking
• Product Updates
• Visme Webinars
• Artificial Intelligence

How to Write a Partnership Proposal (Templates & Tips)

Written by: Raja Mandal

Are you planning to get into a partnership or joint venture with another business? Then you'll have to sell the idea, benefits and your future plans to the prospective partner. To win the partnership, you need to present the complete details in a compelling manner.

A partnership proposal template can help you write a stand-out proposal that will explain how you and the potential business partner can grow together.

In this article, we'll discuss how to write a partnership proposal and highlight actionable tips you can use to propose business partnerships. We've also included some partnership proposal templates you can use to get started quickly.

Table of Contents

What is a partnership proposal, how to write an effective partnership proposal, partnership proposal templates, tips for proposing a business partnership, partnership proposal faqs, create your partnership proposal with visme.

• A partnership proposal is a document that a business uses to explain to another business why they should collaborate and how both parties will benefit before creating a formal contract.
• Partnership proposals help you demonstrate your values, describe your goals, outline benefits for potential partners and establish long-term relationships.
• Follow these steps to write a partnership proposal: research your potential partner, create a solid structure for your proposal, apply your branding, add engaging media and data visualization, and get your team involved.
• Some tips for proposing a business partnership include picking the right company and understanding their needs, talking to the decision-maker, getting warm introductions first, sending a pre-meeting email, being a good listener, and not making it overly promotional.
• Visme can help you create professional, on-brand partnership proposals in minutes. Customize ready-made templates, apply one-click branding, drag and drop built-in design assets, incorporate multimedia and data visualization, and then download or share in multiple ways to win partners for your company.

A partnership proposal is a document created before any contract or agreement is made in a business partnership to determine the benefits of running the business together.

In simple words, a business approaches another business to explain why they should work together and how the partnership will benefit both parties. And the document they use to propose the partnership before making the contract is called a partnership proposal.

Here's a sample partnership proposal.

Now let's discuss the potential benefits of a partnership proposal.

Demonstrate Values

According to a recent study, 89% of shoppers stay loyal to brands that share their values.

Maybe your potential partner is in the same industry as you and offers complementary products and services. But that doesn't make the company an automatic fit for a partnership. A successful partnership is made when the core values of involved businesses align.

The proposal helps you show how your brand values and work ethics align with the other business, giving them a strong reason to accept the proposal.

Describe Your Goals

What do you, as a business, want to achieve out of this partnership? How will the other business help with this? A partnership proposal will include all your future and current goals to help the other company understand how their vision and mission match yours.

Outline Benefits for Potential Partner

One of the critical aspects of a partnership proposal is to explain to the other business the benefits the partnership will bring to the table. You can emphasize the benefits that will help both organizations reach the shared goals you have explained.

Create a Long-Term Relationship

Businesses often want to pull out of a partnership ahead of schedule because the partnership fails to deliver the returns as promised. The primary reason for creating the proposal is that the partnership works out for a long time or draws an amicable conclusion.

Create reports, proposals, ebooks and more

• Dozens of content types to choose from
• Add your brand colors and fonts
• Team collaboration available

Sign up. It’s free.

Now you know what a partnership proposal is and its potential advantages. However, if you have written proposals in the past, you know that crafting a compelling partnership proposal that is also aesthetically appealing is not everyone's cup of tea.

As a business owner, you might have come across a good number of business proposals . Then you also know what it takes to make a proposal stand out and how time-consuming the process of creating a proposal can be.

Keeping that in mind, Visme offers professionally designed partnership proposal templates to help you so that you don't have to create the proposal from scratch.

Follow the steps below to create your partnership proposal.

Do Your Research

Doing your research before you start writing your proposal is the crucial first step of the process. Though you might know that the company is a match for your business and its vision and mission align with yours, it might not be enough.

Look online for information on the potential partner's history, accomplishments, leadership and work ethics. Read case studies , and spend time on their website and social media to conduct an in-depth analysis of the company.

Use your research to explain why you want to partner with the particular company and not others and how it's a win-win for both parties.

Structure Your Partnership Proposal

Once you've researched your potential partner, it's time to structure your partnership proposal. The proposal is your opportunity to create a great first impression of your company on your recipient. According to Forbes, first impressions in business settings may be formed in just seven seconds .

Therefore, you must structure your proposal well to win the deal. Here are some steps to follow when structuring a proposal.

1. Introduce Your Business

The goal of your proposal's introduction is to gain the recipient's interest. This section should include the basic information about you and your company and an overview of the topic to clarify what the proposal is about.

Mention any previous partnerships you have done, share the results, communicate your values and introduce your team . Also, don't forget to provide your contact information.

Look at the "about our company" section of the template below for inspiration.

2. State Your Purpose

Your purpose for the proposal is what you want to make out of this partnership or what problem exists that you need to fix through it. Provide clear information about the proposal and make the main message clear immediately.

3. Define Your Goals and Objectives

In this section, talk about how your goals match the other business and the objectives you will establish to get there together.

If you are having difficulty achieving your business goals, it could be because you aren't setting them wisely. Learn how to create SMART goals and achieve them easily. Here is a template to help you with that.

4. Explain the Benefits

Since you have researched enough about the other company, discuss all the benefits you will bring.

Explain the benefits they can expect from this partnership in the near future. If you are unable to provide an immediate benefit, your potential partner might not sign on.

5. Include Legal Considerations

Partnering with other businesses without any formal partnership agreements is not a wise decision. Also, partnerships, like all corporate structures, come with legal complications. So, include all the legal considerations in the partnership that your potential partner should consider before signing in.

If you're still unsure about putting together a partnership proposal, watch the video below for more information.

Keep Your Partnership Proposal On-Brand

Consistent branding is a crucial aspect of running a business. So, keep every page of your partnership proposal consistent with your brand identity .

Consider your brand colors , brand fonts , logo and other branding elements. If you haven't defined your brand identity yet, choose design elements that match your brand personality .

Visme's Brand Wizard can help you with this. It automatically imports your branded assets so that you can create branded content directly in Visme. Simply input your website URL, choose your brand colors and fonts, choose the branded templates theme and watch the magic happen.

Watch the video below to set up your branding kit in Visme.

Add Engaging Media and Data Visualization

Keep the recipient engaged by adding high-quality visuals such as icons , illustrations, images , videos , interactive content and more.

Attach supporting documents to your proposal, such as graphs, charts , reports , and other data visualizations . These visuals will make the proposal more engaging, helping your prospective partner better understand why you're the right partner for them.

Get Your Team Involved

A business partnership requires a lot of critical decision-making processes from the company's top management. But you should involve all your team members in the process of creating the proposal.

Get your team involved in creating the partnership proposal with Visme's collaboration features .

Leave comments, tag your team members, and edit your partnership proposal in real time.

Watch how easy it is to collaborate with your team in your Visme workspace.

1. Retail Store Partnership Proposal

The retail partnership proposal comes with a modern layout, striking visuals and professionally designed pages that you can easily customize in Visme.

This proposal covers key sections like about us, what makes us different, partnership details and benefits, next steps, and a clean, organized page for terms and conditions.

2. Finance Consultancy Partnership Proposal

This partnership proposal template features several eye-catching pages that are brought to life with unique icons, high-resolution images and stunning fonts. Personalize it by replacing the placeholder text and uploading your brand elements.

In fact, save yourself the hassle of manually uploading each design asset, and use Visme’s brand design tool instead. Simply enter your website URL and let the AI pull your logo, brand colors and fonts to create custom, branded designs.

3. Management Company Partnership Proposal

Make a lasting first impression in front of potential partners by using this company partnership proposal template. It has beautiful colors, attractive shapes and icons, unique data widgets and high-res photos that you can replace with your own.

This brand collaboration proposal template’s design, fonts and whitespace ensure potential partners read through the entire proposal, boosting your chances of signing lucrative deals.

4. Fashion Brand Partnership Proposal

With an attractive layout, colorful icons and on-theme imagery, this fashion partnership proposal template will instantly capture your audience’s attention. It features pre-designed pages to add your company information, partnership benefits and terms.

This partnership proposal example also includes a short case study highlighting how other companies profited by partnering with them.

5. Organization Partnership Proposal

The professional design of this business partnership proposal is ideal for various industries. It features a simple, minimalistic layout with colorful pages, relevant images and ample whitespace—all of which can be customized with a few clicks of a button.

If you’re facing writer's block while writing your partnership proposal, try Visme’s AI text generator . Enter a detailed prompt with your requirements including your tone, audience and objective and sit back as our tool creates ready-to-use drafts for you.

Now that you know how to write a partnership proposal, here are some tips to attract that strategic partner for your business.

Pick the Right Company and Understand Their Needs

The first thing you should do before anything else is pick the right company to propose your partnership. Your future business partner might be from another industry or might offer different products or services from yours. But, you need to make sure that you have shared goals, objectives, vision and mission.

Once you find a business you can partner with, understand their needs and incentives to work with you.

Talk To The Decision-Maker

Working with big companies means dealing with a lot of people, which can really drag things out. Therefore, you want to reach out to the company's decision-maker.

For example, you can talk to the CEO, head of business development and vice president of the finance department who approves the budget. Reaching out to the other people in the company who are not in a decision-making position could slow down the process.

Get Warm Introductions First

One of the best ways to approach your potential partner is through an introduction from a shared connection. Here, you can leverage your relationship with your investors, advisors, and mentors.

Provide the mutual contact with an overview of your partnership proposal that can be forwarded easily. Once the introduction part is complete, follow up regularly and set the next steps.

Send a Pre-Meeting Email

To prepare your client for the meeting, it's wise to send a pre-meeting email. Include quick, scannable information explaining what to expect at the meeting. This will help you set the right expectations and keep you both on the same page.

Design your email using Visme to make the process quick and easy. Our email header templates will help you convey your message visually and make your email as compelling as possible.

Be a Good Listener

Once you're done presenting your proposal, listen to your potential business partner's goals and objectives carefully. Allow the other person to do the talking and share their thoughts. This is one of the strongest foundations for the strategic business partnership to develop and grow.

Don't Make It Overly Promotional

Don't miss an opportunity to highlight your company's achievements. Let the brand voice sound loud, but don't make the proposal overly promotional. You are proposing a mutually beneficial business relationship, not selling a product or service to a customer.

After all, it's a partnership proposal and not a sales letter. Keep your partnership proposal honest and professional.

Learn more about some business proposal presentation tips to present your proposal confidently.

Q. How do you structure a partnership proposal?

A partnership proposal format should include an executive summary, company overview, partnership goals, potential benefits, and terms and conditions.

Q. How do you pitch a partnership?

The best way to pitch a partnership is to create a proposal that defines your value proposition, highlights mutual benefits, shows market potential and presents a clear implementation plan.

Q. How do you write a partnership proposal email?

An effective partnership proposal email includes your company's introduction, a clear statement of your partnership idea, key benefits for both parties and a request for a follow-up meeting. It’s important to keep your partnership letter or email concise, personalized and focused on mutual value.

Q. When do you need a partnership proposal presentation?

You need a partnership proposal presentation when you want to collaborate with other firms, such as for co-marketing or sponsorship purposes. They are used to pitch ideas, communicate complex partnership details and secure investments.

Q. What should a partnership agreement include?

Some of the key elements of a partnership agreement include:

• Partnership goals and objectives
• Roles, responsibilities and commitments of each partner
• Duration of the partnership and renewal terms
• Intellectual property rights and confidentiality clauses
• Dispute resolution procedures
• Termination clauses and conditions

Q. How do you respond to a partnership proposal?

There are several ways to respond to a partnership proposal. You can express appreciation for the offer, ask follow-up questions, request a meeting to discuss further details, or politely decline and explain your reasons.

Use this article and the partnership proposal template to write your partnership proposal and win the deal confidently. When partnering with a business, you might need to create various other documents. Visme's partnership templates can help you acquire a strategic partnership.

But that's not enough. Once you gain the business partnership, ensure that all the stakeholders learn about this great news. Use Visme's partnership press release template to get media coverage and partnership announcement LinkedIn post to share the information on LinkedIn.

Sign up for a free account in Visme today and start creating professional documents for all your business needs.

Easily put together a professional partnership proposal with Visme.

Trusted by leading brands

Recommended content for you:

Create Stunning Content!

Design visual brand experiences for your business whether you are a seasoned designer or a total novice.

About the Author

Raja Antony Mandal is a Content Writer at Visme. He can quickly adapt to different writing styles, possess strong research skills, and know SEO fundamentals. Raja wants to share valuable information with his audience by telling captivating stories in his articles. He wants to travel and party a lot on the weekends, but his guitar, drum set, and volleyball court don’t let him.

WTO / Business / 23 Free Partnership Agreement Templates (Examples) – PDF

23 Free Partnership Agreement Templates (Examples) – PDF

A partnership agreement should be one of the legal documents for your business at the commencement of the business. This partnership contract from the start of your business venture helps educate all partners about their roles, benefits, responsibilities, and limitations. Technically speaking,

A partnership agreement is a written legal document that binds two parties in a business and dictates how they run the business, describing the relationship and roles of both partners.

There are three main types of partnerships available, namely:

• Limited Liability Partnership
•  General Partnership
•  Limited Partnership

All three differ in their impact on a business management structure , taxation, opportunities for investment, and liability implications. It is sacrosanct to mention the partnership type between you and your partner in the partnership agreement.

These you can use interchangeably:

• Business Partnership Agreement
• Partnership Contract
• General Partnership Agreement
• Articles of Partnership

Applicable Laws

There is no general federal law that governs the creation of the agreement; however, it is usually subject to the individual state laws because every state governs business creation.

Who needs a partnership agreement

Every business with more than a sole owner needs a partnership agreement to set ground rules for smooth business running. This binds all the partners in the business and helps in times of decision-making. It is important to have your own agreement because, in the absence of any, your business reverts to the state rules if any of its partners dies or leaves the partnership.

Most states now use the Revised Uniform Partnership Act(1997) or the Uniform Partnership Act (1914) .

A partnership does not actually pay any taxes, but the partners pay taxes on their individual shares. However, the business is liable to face tax charges without an agreement. It is also important to show clear-cut differences between partners based on their contribution share to business capital. This is necessary to divide profits accurately.

Overall, it is necessary to outline the partners’ goals, responsibilities, and joint vision. This makes it easy to anticipate business conflicts and prepare handy solutions as they come.

Components of a Partnership Agreement

It should include all important information about the members of the partnership and basic requirements that set a standard for the business venture.

Some examples of components of an agreement include:

Personal information

This is basic and necessary information that entails writing the full name of each partner that co-owns the business.

Business information

This covers the summary of what business you are venturing into and contains such details as:

• Name of the business : Partners must all agree on the name fitting for the business that they are venturing into and then clearly state it in the agreement.
• Type of business : It is essential to have clear information on the document of the exact specifications of the business. This gives the partners an accurate picture for running the business.
• Purpose of business : Every business needs to have goals and objectives to serve a relevant purpose. Hence, there is a need to state the objectives and aims of the business in the agreement.
• Place of business : A business needs an address where partners meet and carry out their functions. It is essential to include this in the business agreement.
• The number of employees : In planning a business, you should also think about the number of people you need to achieve the business aim. This includes enlisting their various qualifications and functions.

Capital contribution

Every partner gets an ownership percentage of the business based on their contribution to the business capital.

This, in turn, influences some major factors in the running of the business, such as:

• Profit and loss distribution: This shows the load of both profit and business loss each partner carries and depends on factors such as the capital contribution and interest share of the partners.
• Fixed percent: For a business to thrive, there must be a clear definition of the percentage of profit that goes to each partner with reference to their capital contribution.
• Equal shares: This understanding is that all partners take an equal brunt of both losses and profits that occur in the business.
• In proportion to capital contribution: Benefits that come with specific capital contributions and other resources that the business requires to grow.

A partnership can run several accounts for various business transactions. This helps to maintain clear business records and prevent fraudulent activities.

Some account types in partnership business include:

• Capital account: This will be a separate account from the business account, where all members pay their capital contributions.
• Income account: This is also a separate account for the saving of profits and losses that the members incur from the business.
• Salaries and drawing: These are income accounts for the partners, where they can access their income and withdraw at will.
• Bank accounts: The partners should not share the same personal account as the business account but must keep a separate private account.

For the smooth and efficient running of the business, there has to be a clear and systematic sequence of activities that the partners must adhere to in the business.

These include:

• Books and records: There should be clear instructions on records and maintenance of business books . This should include access to these books and instruction on supervision and inspection of the records.
• Management of duties: There is a clear distribution of roles of each partner, as well as management of the partners.
• New partners: There are basic requirements of entering into the business as a new partner and standards for entry.

Voting methods

The partners should agree on voting methods before engaging in the business. This is necessary to have efficiency and accuracy in the running of a business.

Three main methods of voting in business include:

• Proportional to contributions: Each partner’s voting power is a direct reflection of their capital contribution to the business.
• Proportional to profit share: Here, the partners gain voting power in accordance with their share of profit distribution.
• Equal votes: The voting power is equal, and every partner gets a vote.

Partner information

This will include all the legal names and addresses of partners that are currently involved in the partnership, as well as steps to take when partners have to leave the partnership.

They include:

• Ending their partnership on a day they agree on at the commencement of the business
• Completion of the business aim and objective
• The bankruptcy of the business or an individual partner
• Withdrawal of a partner from the partnership
• A partner’s death
• Voluntary Withdrawal: The agreement should state rules for voluntary withdrawal. This occurs when a partner decides to leave the partnership out of their own volition and may result from retirement or business, or at times, personal reasons.
• Involuntary Withdrawal: The partner leaves the business without their consent and may be due to ill health, breach of contract agreement, bankruptcy, or disability. The agreement should state what happens to their shares.
• Retirement: There must be a written retirement clause in the agreement for one of the partners to retire without dissolving the entire partnership. However, if there isn’t, the partnership must dissolve to retire one of its partners, and then a new partnership can form.
• Death: In case of the death of one partner, the agreement must state what happens to the partner’s share. For example, the partner’s shares go to their estate, and other partners may then buy it using the business formula.
• Buyout: It must clearly state when a partner can sell their shares, to whom, and the method of valuation and sales of the shares.
• Non-partner requirement: This covers the requirements necessary for a partner to share an interest with a non-partner. The partner must meet all sales requirements , and the non-partner must have information about the business aims, goals, and interest laws.
• Non-compete requirement: Binds on a partner that leaves and helps the business to keep trade secrets. It is a vital part of the agreement and legally binds all partners.

 General

General instructions that the partners must include in the agreement include adherence to governing laws, arbitration, and partner restrictions on transfer.

• Restrictions on transfer: It should state the limitations of a partner to transfer shares or interests to another partner.
• Arbitration: It states steps in resolving disagreements about the partnership.
• Governing laws: It highlights the state laws that apply to partnership disagreements.

Ensure to register the business and trade name under the state authorities.

Ownership details

This covers a description of each partner’s percentage ownership of the business, as well as the duration of the partnership and terms of the partnership.

The agreement is a rule book that covers the following:

• Percentage of ownership: The agreement should clearly outline the ownership division of the business. Some partnerships share ownership based on the capital contribution of the partners, while others share partnership equally.
• Length of partnership: The partnership deed should state if the partnership will go on indefinitely or that the partnership has a determined time before dissolution.
• Decision making: It should also highlight the conditions for decision making and whether the partners have equal rights or decision making is a function of capital contribution.
• Resolving disputes: It should state the method of dispute resolution and conflict management.
• Authority/Binding method: It should outline the limits to partner authority over the business in order to make all partners aware of possible outcomes of business decisions and execution by individual partners.

Partnership tax elections

The partners need to choose one among them as representatives and contact tax elections. The representative will serve as a lead for the new task laws of the business.

The agreement outlines these rules and allows the partners to:

• vote out of the new elections if they are eligible to do so, and yearly renew this decision
• allow their representative to answer to them about their dealings with the internal revenue service
• choose to have each partner assessed for tax liability when a tax audit goes to partner level

Benefits of a Partnership Agreement

A partnership venture aims at making more profit at a lower cost than with sole business ownership.

Hence, the legal contract that binds all partners to a certain modus operandi has these benefits:

• Income is only taxed once: The Internal Revenue Service only deducts tasks once because there are general profit and income, in contrast to sole ownership where the state deducts tax from individual income.
• Allows you to anticipate and settle potential business conflicts: A written document serves as a guide for possible conflicts you may face as partners and steps to resolve these conflicts.

When you do not draw up an agreement, you will probably face:

• Unexpected tax liability without an agreement may lead to high losses and bankruptcy.
• The agreement helps in the distribution of profits accordingly. However, in the absence of this, there may be partial distribution, and this is of no benefit to the partners.
• Without your own business partnership laws, the state’s partnership laws bind on your business.

Related Documents

From the inception of the business partnership to the daily running of the business, there are additional documents that may be necessary aside from the agreement.

• Notice of Withdrawal from Partnership: This is a notice that a partner tenders to other members of a partnership, notifying them of the partner’s intention to exit the business partnership.
• Assignment of Partnership Interest: This is a document that permits the transfer of one partner’s interest to another partner within the business.
• Partnership Amending Agreement: This allows for a modification in the initial agreement, and the partners can use this to unanimously alter the terms of the agreement.
• Joint Venture Agreement: This document outlines in detail the terms of agreement of two parties that unite to achieve a specific goal at a given time.
• LLC Operating Agreement : This document represents an agreement that highlights the responsibilities, benefits, and rights of its members. It also clearly states the guidelines and rules that govern all members of a limited liability company.
• Business Plan: This is a highly detailed document that encompasses a company’s rule book. This includes the company’s plans, values, aims, goals, financial vision, mission, and employee management plan.

Frequently Asked Questions

If a partner wants to leave a business partnership, the partner must first offer to sell their interest to one of the other partners in the business before offering these shares to an outsider. And so, a partner can choose to willingly transfer interest with another partner in the firm.

Yes, a partnership can own assets, which it can acquire from the partners in the business or directly. In the latter, there is a legal transfer of said assets to the partnership formally.

A tax matters partner is that partner that the members of the partnership elect to represent before the internal revenue system. This representative reports back to the team and assumes this role for a year. According to the law, it is only a general partner that can assume and function in this role.

Final Thoughts

A business partnership agreement is necessary to forestall all future misgivings about the business. It gives clear and explicit roles about the functions and responsibilities of partners and serves as a guide in the business running. You should have a partnership deed when you have business partners and involve a trusted legal practitioner to help you with drawing up the document and Partnership Agreement execution.

About This Article

Was this helpful?

Great! Tell us more about your experience

Not up to par help us fix it, keep reading.

Analysis , Business

Free risk analysis templates (word, excel).

26 Free PEST Analysis Templates

18 Free Nursing Report Sheets (Templates)

Free Loan Amortization Schedule Templates for Excel

Thank you for your feedback.

Your Voice, Our Progress. Your feedback matters a lot to us.

• Election 2024
• Entertainment
• Newsletters
• Photography
• AP Investigations
• AP Buyline Personal Finance
• AP Buyline Shopping
• Press Releases
• Israel-Hamas War
• Russia-Ukraine War
• Global elections
• Asia Pacific
• Latin America
• Middle East
• Election results
• Google trends
• AP & Elections
• College football
• Auto Racing
• Movie reviews
• Book reviews
• Financial Markets
• Business Highlights
• Financial wellness
• Artificial Intelligence
• Social Media

Germany signs agreement with Kenya to bring in skilled workers and plug labor market gaps

German Interior Minister Nancy Faeser, down right, signs a migration agreement with Kenyan’s Prime Cabinet Secretary Musalia Mudavadi, left, as German Chancellor Olaf Scholz, centre behind, and Kenyan President William Ruto, left behind, at the chancellery in Berlin, Friday, Sept. 13, 2024. (AP Photo/Ebrahim Noroozi)

German Chancellor Olaf Scholz, right, welcomes Kenya’s President William Ruto at the chancellery in Berlin, Friday, Sept. 13, 2024. (AP Photo/Ebrahim Noroozi)

German Interior Minister Nancy Faeser, second from right, and Kenyan’s Prime Cabinet Secretary Musalia Mudavadi, left, shake hands after signing a migration agreement at the chancellery in Berlin, Friday, Sept. 13, 2024. Behind them are German Chancellor Olaf Scholz, right, and Kenyan President William Ruto. (AP Photo/Ebrahim Noroozi)

German Interior Minister Nancy Faeser, second from right, and Kenyan’s Prime Cabinet Secretary Musalia Mudavadi, left, pose for a photo after signing a migration agreement at the chancellery in Berlin, Friday, Sept. 13, 2024. Behind them are German Chancellor Olaf Scholz, right, and Kenyan President William Ruto. (AP Photo/Ebrahim Noroozi)

• Copy Link copied

BERLIN (AP) — German and Kenyan officials signed an agreement Friday in Berlin to promote the recruitment of skilled workers who can fill gaps in Germany’s labor market, and to facilitate the repatriation of Kenyans who don’t have the right to stay in Germany.

The agreement was signed during a visit to Germany by Kenyan President William Ruto, who met with German Chancellor Olaf Scholz.

Scholz told reporters after a signing ceremony that it was an important agreement that marks an effort by Germany and Kenya to cooperate more closely on migration.

“This can help us to compensate for a shortage of skilled workers,” Scholz said, adding that Germany is already feeling the impact of such a labor shortage and that it “will be with us for years and decades to come.”

Germany has grappled for years with the need to attract more skilled workers from outside the European Union. Experts say the country needs about 400,000 skilled immigrants each year as its aging workforce shrinks.

“On the other side of the coin, so to speak, the agreement provides for effective return procedures for those who have come to us from Kenya but do not have or cannot acquire the right to stay here. They can now return home more easily and quickly,” Scholz said.

Ruto said the agreement benefits both sides because it brings together the potential of educated young Kenyans and German technology and resources.

He said that he wasn’t worried that the departure of some Kenyans could hurt his own nation’s development, noting that Kenya has a large population of young people, with the median age being around 20. He said there were enough to support the further development of both Kenya and Germany.

Scholz said Germany would benefit from the large number of Kenyan IT specialists.

Germany has already signed similar agreements with India, Georgia and Morocco, and will sign one this weekend with Uzbekistan during a visit there by Scholz, according to the German news agency dpa.

The agreement was signed by German Interior Minister Nancy Faeser and Kenyan’s Prime Cabinet Secretary Musalia Mudavadi in a ceremony at the chancellery in Berlin on Friday as Scholz and Ruto stood behind them.

Scholz’s unpopular coalition government is facing a challenge from the far-right, anti-immigration Alternative for Germany, or AfD, which did well in two recent state elections in eastern Germany. Another comes Sept. 22 in Brandenburg, the state surrounding Berlin.

• Share full article

Advertisement

Supported by

G.M. and Hyundai Plan to Work Together on New Vehicles

General Motors and the South Korean automaker say they will collaborate on new vehicles, buying parts and clean energy technologies.

By Neal E. Boudette

General Motors and Hyundai said on Thursday that they would look for areas where they could collaborate on new vehicles, supply chains and technologies in a bid to cut costs and move faster.

The two automakers said they aimed to work together on internal combustion, electric and hydrogen-powered vehicles. But they did not provide details on where the joint work would be done, which executives would oversee the effort or how quickly they would come up with new models.

“G.M. and Hyundai have complementary strengths and talented teams,” Mary T. Barra, G.M.’s chief executive, said in a statement. “Our goal is to unlock the scale and creativity of both companies to deliver even more competitive vehicles to customers faster and more efficiently.”

The companies have signed a nonbinding agreement and said they would begin exploring possible areas of cooperation immediately.

Like other automakers, G.M. and Hyundai have invested tens of billions of dollars to develop electric vehicles that have so far fallen short of the lofty sales goals some executives had set. Consumer enthusiasm for battery-powered models has cooled in the past year, largely on concerns about the high prices of electric models and the challenges of charging them.

Sales of such cars and trucks are growing at a modest pace, though generally at a faster pace than for conventional gasoline vehicles. Many manufacturers, including Tesla, have cut prices to spur demand and are scrambling to reduce costs.

“This partnership will enable Hyundai Motor and G.M. to evaluate opportunities to enhance competitiveness in key markets and vehicle segments, as well as drive cost efficiencies and provide stronger customer value,” Hyundai’s group executive chair, Chung Eui-sun, said in a statement.

G.M. has been losing money on the electric models it makes but has said it expects those vehicles to become profitable by the end of the year. Ford Motor lost $2.5 billion on its electric vehicle business in the first half of this year, and has set up a development team in California to design models that are less costly to produce.

Automotive partnerships have had a mixed record of success, however. Several years ago, Ford invested in the electric vehicle start-up Rivian, but later decided to sell most of its shares. Ford also established a partnership with Volkswagen, but the companies have reduced their collaboration, and Volkswagen said this year that it would work with Rivian, mainly on software.

G.M. and Honda also formed a partnership to develop electric vehicles. Honda and its luxury brand, Acura, recently introduced two electric sport utility vehicles that are assembled at G.M. factories with G.M.’s battery technology. But the two companies have scrapped plans to work together on more models, and Honda has said it is solely developing its next slate of battery-powered models. Tesla has at different times worked with Toyota and Mercedes-Benz before shifting its strategy.

Neal E. Boudette is based in Michigan and has been covering the auto industry for two decades. He joined The New York Times in 2016 after more than 15 years at The Wall Street Journal. More about Neal E. Boudette

• Personal Finance
• Today's Paper
• Partner Content
• Web Stories
• Entertainment
• Social Viral

UAE, Germany discuss boosting cooperation ties, strategic partnership

They also exchanged views on the latest regional and international developments, particularly the situation in the middle east.

The two top diplomats explored ways to bolstering cooperation and partnership across various sectors. Photo: Shutterstock

Listen to This Article

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

India, UAE ink agreement on operating nuclear plants in Gulf nation

India-UAE sign pacts on LNG supply, crude production and nuclear energy

PM Modi, Abu Dhabi Crown Prince hold discussions to focus on bilateral ties

From Bangkok to Baku: How Indians are jet-setting across the globe in 2024

UAE amnesty program: Indian mission announces facilitation measures

Don't miss the most important news and views of the day. Get them on our Telegram channel

First Published: Sep 14 2024 | 9:24 AM IST

Explore News

• Suzlon Energy Share Price Adani Enterprises Share Price Adani Power Share Price IRFC Share Price Tata Motors Share Price Tata Steel Share Price Yes Bank Share Price Infosys Share Price SBI Share Price Reliance shares
• Latest News Company News Market News India News Politics News Cricket News Personal Finance Technology News World News Industry News Education News Opinion Shows Economy News Lifestyle News Health News
• Today's Paper About Us T&C Privacy Policy Cookie Policy Disclaimer Investor Communication GST registration number List Compliance Contact Us Advertise with Us Sitemap Subscribe Careers BS Apps
• ICC T20 World Cup 2024 Business Standard at 50 Paralympics 2024 Jammu Kashmir Elections 2024 Haryana Elections 2024 Happy Ganesh Chaturthi Wishes

Saturday, September 14, 2024

Thungela inks partnership with Council for Geoscience to drive emissions research

Council for Geoscience CEO, Mosa Mabuza, and Thungela Resources CEO, July Ndlovu. Picture: Supplied

Published Sep 12, 2024

Thungela Resources CEO July Ndlovu said yesterday the coal miner was investing in geoscience solutions to curb carbon emissions after the company signed an agreement to drive Carbon Capture, Utilisation, and Storage (CCUS) research.

Signed with the Council for Geoscience (CGS), the agreement seeks to advance geoscientific initiatives related to climate change mitigation.

“As a coal producer and exporter, we recognise the need to adapt and mitigate emissions from the burning of coal,” said Ndlovu.

He said the agreement with the CGS was demonstrative of Thungela’s commitments to active participation in climate change adaptation and mitigation efforts.

“By working with the CGS, we are investing in geoscience-based solutions that support national priorities and international climate agreements, including South Africa’s Nationally Determined Contributions under the Paris Agreement,” said Ndlovu.

This comes as South Africa has just secured R628 million from the EU to get its green hydrogen industry rolling. Several South African miners have also been investing in renewable energy such as solar power plants, key investments seen as reducing their carbon footprints and reliance on coal-fired electricity.

Thungela’s partnership agreement with the CGS will help to institutionalise the collaboration between the two in effective implementation of carbon capture, utilisation and storage.

The agreement will be hinged on “equality, reciprocity, and mutual benefit” through implementation of technologies that promote research and development of carbon capture, storage and utilisation.

“In addition to advancing climate and environmental research, the partnership between CGS and Thungela will focus on capacity building through education and training initiatives. These programs will help develop a pool of skilled professionals in the energy sector, equipped to meet future challenges and contribute to South Africa’s climate goals,” said the two companies.

Mineral Resources and Energy Minister, Gwede Mantashe, recently launched the CCUS plant in Mpumalanga.

Mosa Mabuza, CEO of the CGS, said after Mantashe called for stronger public-private partnerships to help South Africa meet its climate commitments, the agreement with Thungela was a step in the right direction.

“Today’s signing represents a collaborative effort to drive research, development, and implementation of geoscientific programs. By combining our expertise, CGS and Thungela are setting the stage for significant advancements in carbon capture and sustainable resource management,” said Mabuza.

Ndlovu, who recently indicated that the company’s carbon emission strategies include planned mine closures, said in April that Thungela was committed to reducing its scope 1 and scope 2 emissions by 30% by 2030.

He added that the company had attained an 11% reduction in scope 1 and scope 2 emissions in 2023, with energy and carbon intensity improvements that reflect the dedication of its sites to energy efficiency improvements as well as the implementation of a 4MW renewable energy project at Zibulo which is expected to be operational before the end of this year.

BUSINESS REPORT

Related Topics:

JAVASCRIPT IS DISABLED. Please enable JavaScript on your browser to best view this site.

• Akron Obituaries
• Atwood Obituaries
• Burket Obituaries
• Claypool Obituaries
• Cromwell Obituaries
• Etna Green Obituaries
• Leesburg Obituaries
• Ligonier Obituaries
• Mentone Obituaries
• Milford Obituaries
• North Webster Obituaries
• Pierceton Obituaries
• Sidney Obituaries
• Silver Lake Obituaries
• Syracuse Obituaries
• Warsaw Obituaries
• Winona Lake Obituaries
• Nappanee Obituaries
• New Paris Obituaries
• Fulton County
• Bourbon Obituaries
• North Manchester Obituaries
• South Whitley Obituaries
• Tippecanoe Valley Schools
• Warsaw Community Schools
• Wawasee Community Schools
• Whitko Community Schools
• Leesburg News
• Milford News
• North Webster News
• Syracuse News
• Warsaw News
• Winona Lake News
• Public Records
• Entertainment

InkFreeNews.com

The most "liked" up-to-the-minute news in kosciusko county, indiana.

• Letters to the Editor
• Weekly Poll
• Public Notices

Voya Financial to acquire Indianapolis-based OneAmerica Financial’s retirement plan business

Indianapolis-based OneAmerica Financial will be acquired by New York City-based Voya Financial. Photo courtesy of OneAmerica Financial.

News Release

INDIANAPOLIS — Voya Financial, Inc. and OneAmerica Financial, Inc., a diversified mutual insurance organization, announced that the companies have entered into a definitive agreement for Voya to acquire OneAmerica Financial’s full-service retirement plan business.

In a press release, Voya Financial stated the acquisition adds strategically attractive scale to Voya’s full-service retirement business within Wealth Solutions, providing Voya with a broader set of capabilities that complement its existing product suite, including competitive employee stock ownership plan administration, and new opportunities to expand Voya’s distribution footprint and deepen its existing advisor relationships.

OneAmerica Financial’s full-service retirement plan business comprises 401(k), 403(b), 457, non-qualified deferred compensation plans and employee stock ownership plans. The transaction adds approximately $47 billion of assets to Voya’s strategically important full-service Emerging and Mid-Market segments and extends the firm’s leadership position in the Large Market by adding approximately $15 billion of recordkeeping assets.   As a result of the acquisition, Voya’s Wealth Solutions Defined Contribution client assets will grow to $580 billion, with total retirement plan and participant count reaching 60,000 and 7.9 million, respectively.

“This announcement is an exciting opportunity to add scale and new capabilities to our Wealth Solutions business that will help advance our growth strategy by offering workplace benefits and savings solutions to more individuals,” said Heather Lavallee, CEO, Voya Financial. “Voya is a purpose-driven company focused on supporting improved financial outcomes for our customers. OneAmerica is equally passionate about enabling financial security for their customers, making them a strong fit for Voya.”

“OneAmerica Financial is placing its retirement business in the hands of an organization that can deliver industry-leading offerings,” said Scott Davison, chairman, president and CEO of OneAmerica Financial, Inc. “For 60 years, we have been committed to serving the retirement market by helping our customers face every day with greater certainty. Voya is the firm to deliver on that commitment. We see this as a great opportunity for our customers and the OneAmerica Financial associates that will continue to grow with Voya, while we will focus on our remaining core product lines where we see tremendous growth potential.”

With the ability to serve employers and plans of all segments and sizes, including startup, Emerging and Mid, Large and Mega market plans, the acquisition of OneAmerica Financial’s full-service retirement plan business reflects Voya’s commitment to growing its Workplace Solutions businesses, supporting more participants with their workplace benefits and savings needs.

“This acquisition fully aligns with Voya’s relentless focus on customer satisfaction, leveraging the strength and expertise of two dedicated organizations who deliver a variety of workplace benefits and savings solutions,” said Rob Grubka, CEO, Workplace Solutions, Voya Financial. “OneAmerica’s broad range of retirement capabilities, combined with our existing product suite and digital solutions, provides an opportunity to extend Voya’s reach across all market segments to deliver health, wealth and investment solutions through the workplace and institutions.”

The transaction expands the services Voya provides to workplace benefits and savings plans it serves across all markets, tax codes and employer sizes. This includes OneAmerica Financial’s competitive employee stock ownership program and the benefits of its broad reach across the advisor community, bringing new and increased intermediary relationships to help expand Voya’s footprint.

“OneAmerica is centered around the people we serve, and we are deeply passionate about what we do,” said Sandy McCarthy, president of Retirement Services at OneAmerica Financial. “Our goal has always been to take our business to the next level to continuously improve our clients’ experiences to better optimize their outcomes. Voya shares this vision, and we are excited to see how our customers and associates will benefit in this new chapter.”

The transaction is expected to close on Jan. 1, 2025, subject to customary closing conditions, including regulatory approvals. Additional information on the transaction and its financial impact has been made available in a supplemental investor presentation on Voya’s investor relations website at  investors.voya.com . Voya intends to provide more details on the transaction during its third-quarter 2024 earnings call.

Citi is serving as financial advisor and Eversheds Sutherland LLP is serving as legal counsel to Voya in connection with this transaction.

Goldman Sachs & Co. LLC is serving as financial advisor and Sidley Austin, LLP is serving as legal counsel to OneAmerica Financial Partners in connection with this transaction.

Featured Local Savings

Comments are closed.