Partnership Agreement Information
A Partnership Agreement, also called a General Partnership or Partnership Contract, is a document used to dictate the terms of a business partnership between two or more partners. It encompasses information about capital contributions, management, and profit and loss distribution.
Do I Need a Partnership Agreement?
Anyone entering into a business partnership with one or more partners, including friends, family members, or spouses, should have a Partnership Agreement in order to lay out the terms and conditions of the business relationship.
What Decisions do I Need to make in a Partnership Agreement?
In order to complete your Partnership Agreement, you and your partner(s) will need to make a number of decisions in relation to the terms of your partnership. This includes things like:
- Whether the partnership will end on a fixed date.
- What each partner will be contributing and the value of those contributions.
- How profit and loss will be distributed among partners.
- When meetings will be held (weekly, monthly, quarterly, annually, etc.)
- Whether you will be able to acquire new partners or not.
- If votes will be decided by majority or unanimously.
Management in a Partnership Agreement:
In your Partnership Agreement, you will be asked to select how your business will be managed. You may choose to either have all partners participate, or you may name one partner to head the management of the company.
You may also choose to limit the decision making allowances of partners by placing limits on certain actions, such as:
- Cashing checks
- Accruing debts or expenses
- Selling assets
- Hiring or firing employees
- Waiving debt owed to the business
Dissolving a Partnership:
In a Partnership Agreement, you will need to designate which rules you will follow if any of the partners wish to exit the agreement. This means setting terms for:
- How much notice a partner must provide prior to exiting the partnership.
- If a partner's withdrawal will cause the partnership to dissolve.