Partnership Agreement | Legal Documents Generator

Partnership Agreement

A Partnership Agreement is a contract between two or more individuals who join together to run a business as co-owners.

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Overview

A Partnership Agreement is a legally binding contract that outlines the terms and conditions of a business partnership. This document defines each partner's roles, responsibilities, capital contributions, profit and loss sharing, decision-making processes, and procedures for resolving disputes. Without a written Partnership Agreement, your partnership will be governed by default state laws, which may not align with your intentions. A comprehensive agreement helps prevent misunderstandings and provides a framework for addressing various business situations.

Benefits

  • Clearly defines ownership percentages and capital contributions
  • Establishes profit and loss distribution methods
  • Outlines management responsibilities and decision-making authority
  • Sets procedures for resolving disputes between partners
  • Includes rules for adding or removing partners
  • Establishes procedures for dissolution or buyout

When to Use

  • When forming a new business partnership
  • When adding or removing partners
  • When changing the structure of an existing partnership
  • When updating profit distribution methods

What's Included

This document template includes the following sections:

  • Partnership Formation
  • Capital Contributions
  • Profit and Loss Distribution
  • Management and Voting
  • Partner Duties and Obligations
  • Addition and Withdrawal of Partners
  • Dispute Resolution
  • Dissolution Procedures

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Frequently Asked Questions

While not legally required in most states, having a written Partnership Agreement is highly recommended. Without one, your partnership will be governed by your state's default partnership laws, which may not align with your intentions or business needs. A written agreement gives you control over how your partnership operates and helps prevent misunderstandings.

In a general partnership, all partners share in the management and have unlimited personal liability for partnership debts. In a limited partnership, there are general partners who manage the business and have unlimited liability, and limited partners who are typically investors with limited liability up to their investment amount. Limited partners cannot participate in management without risking their limited liability status.

Your Partnership Agreement should include a buyout provision that outlines the process for a partner's exit. This typically includes how to value the departing partner's interest, payment terms, and any restrictions on the departing partner's future business activities. Without such provisions, partner departures can lead to disputes or even forced dissolution of the partnership.

No, partners can contribute different amounts of money, property, or services to the partnership. Your Partnership Agreement should clearly document each partner's contributions and how these relate to ownership percentages and profit distribution. Partners can also agree that non-monetary contributions, such as expertise or client relationships, have value for determining ownership stakes.

In most states, a Partnership Agreement does not need to be notarized to be legally binding. However, having it notarized can provide an additional layer of authenticity and can help prevent disputes about when it was signed or who signed it. Some states or specific situations may require notarization, so check your state's requirements.

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