What should go in a partnership agreement?
Where you are going to prepare a partnership agreement, you are free to set it up however you want, because they are fairly flexible. Essentially, you just want to include all of the relevant things about how your business is owned, controlled and operated. The basic things that should go into such a partnership agreement for a general partnership include:
1. Identification of the partnership name and any trade names the business will be using.
2. How long the partnership will last - this can be a determinate amount of time, like 10 years, or simply a statement that the partnership will continue indefinitely, until dissolved.
3. A statement of the partnership’s purpose - this should be kept as broad as possible so that you have flexibility down the road, if you want to expand your partnership’s business without having to worry about amending the agreement.
4. The contributions/investments (whether it’s cash, services, or property) each of the partners will be making to the partnership.
5. How profits and losses are to be split and shared among the partners.
6. When profits can be drawn from the partnership and distributed to the partners - this can be monthly, yearly, any time the partners agree to, etc.
7. A detailed statement of any salaries being paid to any of the partners.
8. The authority the individual partners have to take actions which can bind the partnership and the other partners.
9. How the partnership is to be managed, whether any of the partners will hold specific/particular management responsibilities, how voting on management issues is to be handled, etc.
10. Whether partners are allowed to be involved in any business activities outside of the partnership and, if so, to what extent.
11. How partners can leave the partnership, whether they must offer the remaining partners an opportunity to buy them out, etc.
12. How partners can be expelled from the partnership by the other partners.
13. How new partners can be brought into the partnership.
14. How disputes between the partners are to be handled (i.e., mediation, arbitration, litigation in a particular state, etc.).