Starting a business partnership can feel a bit like stepping onto a rollercoaster: thrilling, yes, but also a little scary if you forget your seatbelt. A business partnership agreement serves as that seatbelt, keeping everyone's interests safe and ensuring you and your partners are aligned right from the start. Running a partnership without an agreement in writing is a risk you simply shouldn't take.
In this guide, you'll discover exactly what a partnership agreement is, why it's necessary even if your business is tiny, how to write one, and we'll also provide a free business partnership agreement template to help you get started.
The full content of the template is available, when you want to edit the text and enter your details make sure to click on the button to use the template.
Business Partnership Agreement
THE BALLET RETREAT, LTD.
contract
Business Partnership Agreement
This Business Partnership Agreement is made this in , with original copies, by and between:
, a corporation, .
, a company, .
The above entities may collectively be referred to as the “Partners.”
PARTNERSHIP NAME AND BUSINESS
Nature of Business: The Partners agree that they shall collaborate for the following purpose:
Name: The business shall be conducted under the name:
Official Address: The official address of the business shall be:
TERM
The partnership begins on and continues until terminated in accordance with this agreement.
PARTNERSHIP CONTRIBUTION
Partner 1 Contribution:
Partner 2 Contribution:
PROFIT AND LOSS ALLOCATION
The profits and losses of the partnership shall be allocated as follows:
ADDITIONAL PARTNERS
No additional person may be introduced as a Partner or other business carried on by the Partnership without the written consent of all Partners in this agreement.
MANAGEMENT OF PARTNERSHIP BUSINESS
Each Partner may participate in the management of the Partnership.
Any disagreements in the ordinary course of business shall be resolved by Partners holding the majority stake in the Partnership.
DEPARTURE OF BUSINESS PARTNER
In the event a Partner withdraws or retires, the remaining Partners may continue operating the business under the same name.
A withdrawing Partner must provide at least 0 days days’ prior written notice.
No shares in the Partnership may be transferred without written consent from the other Partner(s).
The remaining Partner(s) shall not be obligated to pay any withdrawing or retiring Partner for the value of their shares or other accrued benefits.
NON-COMPETE ARRANGEMENTS
A withdrawing Partner agrees not to engage in a competing business for a period of 0 days days.
AMENDMENT OF PARTNERSHIP AGREEMENT
This Partnership Agreement may only be amended with the written consent of all Partners.
MISCELLANEOUS
Severability: If any provision of this agreement is found to be invalid or unenforceable, the remaining provisions shall remain in full force and effect.
Binding Effect: This agreement binds and benefits the Partners and their respective heirs, successors, and assigns.
JURISDICTION
This Partnership Agreement shall be governed by the laws of the .
IN WITNESS WHEREOF, the Partners have executed this agreement as of the date first written above.
Disclaimer: The original creator, the author of this template, and fynk GmbH are not responsible for any damages or liabilities that may result from using this template. This template should not be considered a substitute for legal advice, and consulting with a legal professional is recommended before use. fynk GmbH, the original creator, and the author do not provide legal advice and will not be held accountable for any legal consequences arising from its use.
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Background Information
Learn how to create a Business Partnership Agreement
Discover what a partnership agreement covers, when and why you need one, essential clauses to include, and how to draft your agreement quickly.
What Is a Business Partnership Agreement?
A business partnership agreement is a legally binding contract between two or more partners that clearly outlines the terms and conditions of the partnership. Put simply, it’s the document that governs how your partnership operates. This agreement sets out each partner’s rights and responsibilities, their business contributions, how profits and losses get divided, and plenty more.
Crucially, having your own partnership agreement means you’re not stuck with default state laws controlling your business. Most partnerships in the U.S. fall under standard rules like the Uniform Partnership Act or Revised UPA if no agreement exists.
Creating your own custom agreement lets you decide exactly how to handle critical situations instead of relying on generic rules that might not suit your unique partnership.
But why do you really need a partnership agreement?
Even if you’re going into business with your best friend or family member, trust alone won’t cut it. Great partnerships are built not only on trust but on clear, shared expectations.
Without a comprehensive agreement, you’re essentially flying blind and setting yourself up for potential conflicts. Disputes over decisions, finances, or business direction become more likely.
The more detailed your partnership contract is from the start, the fewer headaches you’ll encounter later.
Business partnerships naturally evolve, partners retire, new ones join, and strategies shift. That’s why a detailed agreement offers strong protection as your business grows, a step that you don’t want to skip.
6 Types of Business Partnership Agreements
Generally speaking, we can see 5 different types of business partnership agreements:
1. General Partnership Agreement
This is the most straightforward type of partnership, where all partners share equal responsibility, management roles, profits, losses, and liabilities. Ideal for partners actively involved in daily operations.
2. Limited Partnership (LP) Agreement
In an LP, there are two kinds of partners general partners (fully liable and actively involved in management) and limited partners (investors who contribute capital but have limited liability and no management role). It’s beneficial for attracting investors without giving up management control.
3. Limited Liability Partnership (LLP) Agreement
An LLP protects partners from personal liability related to the actions of other partners. It’s commonly used by professional services such as law firms and accounting firms, providing liability protection while allowing each partner operational autonomy.
4. Real Estate Partnership Agreement
Specifically designed for partners investing in property, a real estate partnership agreement defines responsibilities related to property acquisition, management, distribution of rental income, expenses, and handling property sales.
5. 50/50 Partnership Agreement
In a 50/50 partnership, two partners equally own and control the business. Clear decision-making and dispute resolution clauses are essential to navigate potential deadlocks.
6. Business Partnership Agreement for Small Businesses
Tailored specifically to smaller ventures, this type of agreement is simplified yet thorough enough to protect each partner’s interests, clearly outlining roles, profit sharing, and conflict management.
What’s Included in a Business Partnership Agreement
If you’re wondering how to write a business partnership agreement, it helps to know exactly what sections and terms you should cover. Here’s a rundown of the most important elements that every solid (yet simple) partnership agreement or contract should include:
Partnership Basics (Name, Purpose, and Duration)
Clearly state the official name of the partnership (and confirm it’s available to use in your state), the partnership’s primary purpose, and its main business activities. Specify the start date and whether the partnership has a set duration or continues indefinitely.
For example, you might state the business operates until a specific date or until a partner chooses to exit, with provisions allowing for extensions if needed.
Capital Contributions and Ownership
Outline what each partner is bringing into the business at the start, whether it’s cash, property, equipment, or services. Assign each partner an ownership percentage based on these contributions.
If equal ownership is the goal, typically everyone contributes equally, or you explicitly agree to an even split regardless of contributions. Mention any initial loans to the partnership and whether additional contributions may be required later on.
Profit, Loss, and Distribution of Funds
Decide exactly how profits and losses will be split among partners. Usually, distributions align with ownership percentages, but partners can agree to different ratios. Clarify when and how partners can withdraw money, such as monthly or quarterly distributions or salary draws. Also, indicate how much cash should remain in the business to cover operations.
Clearly outlining distribution guidelines helps avoid confusion about when and how partners can access profits, and specifies the bank account for partnership funds.
Roles, Duties, and Decision-Making
Define each partner’s roles and responsibilities within the business. Who’s in charge of daily operations, sales, or finances? Clearly specify how decisions will be made: will you require unanimous consent for big decisions like taking on loans or changing business strategy, or will a majority vote be enough?
Clarify what each partner can decide individually and what decisions require group discussion and a vote. Include provisions for handling tie votes, like using a trusted third-party tiebreaker or mediation. Additionally, outline the limits of each partner’s authority to bind the business, specifying who can sign contracts or make commitments on behalf of the partnership.
Clearly defining partner authority prevents one partner from accidentally or intentionally committing the business to obligations the others haven’t agreed upon.
Partner Withdrawals, Retirement, or Death
Plan proactively for challenging scenarios to avoid potential crises. Specify what happens if a partner wants to exit, retires, becomes incapacitated, or passes away. Often, this includes a buyout clause, laying out the process for remaining partners to purchase the departing partner’s share, with a clear valuation formula.
Include details about notice requirements for leaving the partnership and restrictions on selling shares externally. In case of a partner’s death, many agreements specify a life insurance policy on partners, with the proceeds used for buying out the deceased partner’s estate.
Adding New Partners
If there’s a possibility of bringing on additional partners later, clearly define how this will happen. Typically, adding a partner requires consent from all existing partners and an amendment to the partnership agreement.
Describe how a new partner’s contributions and ownership stakes will be determined, and clarify how these will affect the current partners’ shares. This ensures that growth, like bringing in investors or key employees, proceeds smoothly and fairly.
Dispute Resolution
Even friendly partners occasionally clash. Rather than immediately resorting to costly lawsuits, it’s smart to include a clause about resolving disputes. You might require partners to attempt mediation or arbitration before pursuing court action. This saves time, money, and keeps the partnership healthy.
You could also address how to resolve a deadlocked vote, perhaps involving an external advisor or employing a buy-sell arrangement allowing one partner to buy out the other if necessary. The aim is to create a clear plan for resolving disagreements without stalling the business.
Non-Compete and Confidentiality
Protecting the partnership’s interests often means limiting competition and ensuring confidentiality. Non-compete clauses restrict partners from establishing or joining competing businesses during and possibly after their involvement. Confidentiality clauses prevent partners (including former ones) from revealing trade secrets, client lists, or sensitive information. These provisions safeguard the business against the risks posed by partners leaving or competing.
Termination and Dissolution
Clearly state the situations that would trigger dissolving the partnership, such as mutual termination agreement, bankruptcy, or all but one partner leaving. Describe the winding-up process, outlining how assets will be liquidated, debts settled, and remaining funds distributed.
A clearly outlined dissolution plan allows partners to conclude the partnership with minimal drama. Specify how partners can initiate termination, such as providing written notice 30 or 60 days in advance. Additionally, outline how amendments to the partnership agreement can be made, typically requiring unanimous written consent.
Governing Law
In the governing law clause, specify which state’s laws will apply to your partnership and the agreement itself, typically the state where your business operates or was formed. Clarifying the governing jurisdiction helps ensure legal predictability, especially if disputes reach the courtroom.
The list above isn’t exhaustive, but it includes the key sections most partnership agreements should cover. Feel free to include additional clauses tailored to your specific business needs. For instance, if you’re in a real estate partnership, you might add provisions around handling property titles or real estate licenses.
If you’re a tech startup, you might address intellectual property ownership. The flexibility of a written agreement allows you to create a customized roadmap that suits exactly how you and your partners want your business to run.
Business Partnership Agreement Templates and Samples
Drafting a partnership agreement from scratch can feel tedious, but there’s no need to start with a blank page. We’re providing a free Business Partnership Agreement template to jumpstart your process. This template is based on a real-world contract. It’s structured, detailed, and legally sound, covering all the critical elements we’ve discussed above.
What’s inside the template?
The template includes clearly outlined sections covering partner names, business details, capital contributions, ownership percentages, management responsibilities, profit and loss sharing, dispute resolution, and exit procedures, among others. It contains customizable placeholders (such as partner names, percentages, notice periods) that make adding your specific details straightforward.
Using fynk, using these dynamic fields you simply click to complete, helping ensure no key information is overlooked.
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❌ Overlooking Key Clauses: Ignoring clauses on dispute resolution, partner exits, and decision-making can lead to significant future conflicts.
❌ Vagueness: Ambiguous terms and conditions create misunderstandings always strive for clarity and precision.
❌ Ignoring Legal Review: Bypassing professional legal advice might leave your agreement vulnerable to future disputes or non-compliance.
❌ Not Updating Regularly: Your agreement should evolve as your business grows. Regular updates prevent outdated terms from causing disputes.
FAQs
Do I Need a Lawyer to Draft a Partnership Agreement?
While not mandatory, legal guidance is highly recommended, especially for complex partnerships or significant investments. A lawyer ensures your agreement fully complies with relevant laws and adequately protects your interests.
Can I Modify an Existing Partnership Agreement?
Yes, partnership agreements are amendable with mutual consent from all partners. Regular updates help your agreement accurately reflect changes in business circumstances and partner roles.
What Happens If There Is No Written Agreement?
Without a written agreement, default state laws govern your partnership, potentially leading to unintended and disadvantageous outcomes, including disputes over profits, roles, or business dissolution.
A notice provision in a contract specifies the requirements and procedures for delivering formal communications between the parties involved. It ensures that all parties are informed in a timely and consistent manner, often detailing acceptable methods of delivery, addresses, and timeframes for these communications.
A buyout clause is a contractual provision that allows one party to terminate the agreement by paying a predetermined amount to the other party, essentially permitting the purchase of rights or release from obligations. Typically utilized in employment contracts, sports agreements, or partnership terms, a buyout clause provides financial security and predictability by outlining the conditions and costs associated with ending the relationship early.
The dispute resolution clause outlines the methods by which any disagreements arising from a contract will be managed, specifying procedures such as negotiation, mediation, arbitration, or litigation. This clause aims to provide a clear framework for resolving conflicts efficiently, thus minimizing potential disruptions to the contractual relationship.
A binding arbitration clause requires parties to resolve disputes through arbitration rather than litigation, with the arbitrator's decision being final and legally enforceable. This mechanism aims to provide a more efficient and private resolution process compared to traditional court proceedings.
The mediation clause requires that parties attempt to resolve disputes through a neutral third-party mediator before pursuing litigation or arbitration. This process fosters open communication and aims to reach a mutually satisfactory agreement, minimizing time and legal costs.
A "Covenant Not to Compete" is a contractual clause where one party agrees not to enter into or start a similar profession or trade in competition against another party. This clause is typically used to protect business interests by restricting competitive actions in a specified geographic area and for a certain period after the termination of a business relationship.
A confidentiality clause is a provision in a contract that obligates one or both parties to keep certain information confidential and not to disclose it to third parties without prior consent. This clause is designed to protect sensitive information such as trade secrets, business strategies, and proprietary data shared during the course of the contractual relationship.
The "Governing Law and Jurisdiction" clause specifies which region's legal framework will be applied in interpreting and enforcing the terms of a contract and designates the location where any legal disputes will be resolved. This clause is crucial for determining procedural and substantive legal matters, ensuring both parties are aware of the legal standards and courts that will have authority in case of conflicts.
The intellectual property ownership clause outlines the rights and responsibilities regarding the ownership and control of intellectual property (IP) created or used within the scope of a contract. Typically, it specifies whether the IP rights are retained by the creator, transferred to another party, or shared between parties involved, thereby preventing potential disputes over IP rights.
8 example clauses
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