What is a partnership agreement?
A partnership agreement is the document which governs how a partnership is managed and controlled (much like the bylaws of a corporation or the LLC operating agreement for a limited liability company). While you do not need to prepare a partnership agreement prior to setting up your partnership, it is highly advisable that you do so. First, it allows you to clearly define details about your partnership, which can help avoid trouble down the road. In addition, it will allow you to avoid any of the state’s default rules about partnership operation that you may not like, so you can set your partnership up to be operated exactly as you want.
Partnership agreements do not have to be overly complicated, in terms of what goes in them. A partnership agreement should simply contain all of the major details about the partnership’s ownership and management - what percentage of ownership each partner has, what percentage of control each partner has, what percentage of profits each partner is entitled to, if and/or when any meetings are to be held, etc. You should also include some of the boilerplate provisions that appear in many contracts, principally among these being what happens if there is a dispute or conflict between the partners.