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A partnership agreement is a legal document that outlines the way a business partnership or legal entity is run. It details the relationship between its partners, defines assets, profit shares and liabilities for each partner.
Partnership agreements can be called different names, some of which include:
Partnership agreements establish clear expectations for the partners involved related to rules for how the partners will manage the business.
Learn more about partnership agreements.
These are the steps you can follow to write a partnership agreement:
Here is an article on the process of drafting your own partnership agreement.
Meet some lawyers on our platformA partnership agreement can be modified to reflect the needs of the partnership being formed. However, there are some key elements common in most partnership agreement. Here are some of them:
What does a partnership agreement cost ?
A general partnership is the most basic form of a business partnership. A general partnership does not require forming a business entity with the state. The partners form the business by signing a partnership agreement. General partnerships are easy to form as well as dissolve. Most partnerships dissolve when any partner dies or goes bankrupt.
Generally, ownership and profits are split evenly among the partners. This doesn’t mean that they will also have even ownership. The partners have independent authority to bind the business to contracts or loans. All partners also have total liability, making them responsible for all of the business's debts and legal obligations.
Limited partnerships are formal business entities that need to be authorized by the state. They have at least one general partner who is liable for the business and one or more limited partners who provide money but do not manage the business. Limited partners invest in the business for monetary returns. They are not responsible for the debts and liabilities of the business. Such silent partner limited liability is used when limited partners can share in the profit, but cannot lose more than they've invested.
A limited liability partnership works like a general partnership where all partners actively managing the business, but they have limited liability for each another's actions. The partners bear full responsibility for the debts and liabilities of the business, but are not responsible for errors made by other partners.
Limited liability partnerships are not permitted in all states. Some professions where limited liability partnerships are used are medicine, law, and accountancy.
A limited liability limited partnership operates like a limited partnership where at least one general partner manages the business, but the limited liability limited partnership limits the general partner's liability so that all the partners have protection.
A limited liability limited partnership is only available in some states. These states are, Alabama, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maryland, Minnesota, Missouri, Montana, Nevada, North Carolina, North Dakota, Oklahoma, Pennsylvania, South Dakota, Texas, Virginia, Washington, and Wyoming. Since they are not recognized by all states, companies that function in multiple states might not be able to use them.
Here is more on types of partnership agreements.
A partnership agreement is generally written by the company forming the partnership. It works like a corporation’s articles of incorporation because it establishes how the business will function and run. Companies generally use their in-house counsel to draft the partnership agreement. Other partners can also make contributions and negotiations before agreeing to it and signing it.
If you are a business owner, looking to draft your own partnership agreement, you can do so using free templates available online. It is advisable to contact a business lawyer or a partnership agreement lawyer to ensure that the agreement follows the federal, state and local laws.
Do you need help drafting a partnership agreement? Post a project in ContractsCounsel’s marketplace and get free bids from lawyers that specialize in partnership agreements. All lawyers are vetted by our team and peer reviewed for you to explore before hiring.
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.