Partnership Agreement Template

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Updated July 27, 2022

A partnership agreement includes all matters involving a partnership between two or more parties (partners). The agreement should include each partner’s ownership, obligations, and day-to-day responsibility.

Depending on the type of partnership, general partners may have personal liability while limited partners have limited liability.

“Partnership” Definition

“means an association of two or more persons to carry on as co-owners a business for profit.”

Source: Uniform Partnership Act – Section 102(11)

By State

By Type (5)


General Partnership (GP) Agreement – All partners share an equal amount of personal liability based on their ownership of the entity.

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Limited Partnership (LP) Agreement – Limited partners have no liability and do not participate in day-to-day business activities. Only the general partner(s) will have liability on behalf of the entire partnership.

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Limited Liability Partnership (LLP) Agreement – Mainly for professional occupations (lawyer, doctor, etc.). Allows the partners to be liable for personal acts only, not financial obligations.

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*Limited Liability Limited Partnership (LLLP) Agreement – Same as an LLP, except the general partners possess limited liability in addition to the limited partners.

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*Not offered in all States (view applicable States)

 


Limited Liability Company (LLC) – Specifically for partnerships registered in the state as an LLC. Also known as an “operating agreement.”

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Table of Contents

Partnership Examples

This partnership agreement can be used for:

  • Small businesses
  • Real estate companies
  • Law firms
  • Medical offices
  • 50/50 arrangements
  • Family-run businesses (ex. husband and wife)

Partnership Types (Differences)

Partnership Types Who has Personal Liability? Required to be Active Annual Meetings Required?
General Partnership (GP) All partners All partners No
Limited Partnership (LP) General Partner(s) only General partner(s) No
Limited Liability Partnership (LLP) All partners (for negligent acts only, not for debts) All partners No
Limited Liability Limited Partnership (LLLP) No partners General partner(s) No
Limited Liability Company (LLC) No partners No requirement Yes

How are Profits Taxed?

Partnerships are considered pass-through entities and taxed on a personal level (26 U.S. Code § 701).

The partnership will send copies to each partner a Schedule K-1 (Form 1065) that reports their portion of income (or deductions). The partner must then attach the Schedule K-1 to their personal filing when submitting it to the IRS.

Self-Employment Tax

Only general partners are subject to self-employment taxes. Limited partners pay taxes based solely on the partnership’s pass-through entity status.

LLC’s

An LLC of two (2) or more individuals, by default, is taxed as a partnership unless it files IRS Form 8832 within 75 days of formation (26 CFR § 301.7701-3(c)(1)(iii)).

Sample Partnership Agreement

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How to Write

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I. Partnership Details

(1) Date Of Partnership Effect. Establish the exact date when this agreement’s Partnership conditions and terms become active in the first statement.

(2) Entity Name. The official name of the Partnership must be dispatched where requested. This must be how the concerned Partnership will be referred to (legally) upon the execution of this agreement.

(3) State Of Formation. Furnish the name of the State where the Partnership is formed.

(4) Place Of Business. Document the name of the State where the Partnership shall operate its business. This must be where the main office or headquarters can be physically viewed and visited.

Select Item 5, Item 6, Item 7, Or Item 8 To Classify Partnership

(5) General Partnership. This Partnership must be categorized properly. If every Partner will be equally responsible for this business as well as any liabilities or debts it gains then mark the first checkbox to define Statement (B). By marking the first checkbox for Statement B, every Partner named above will be designated as a General Partner.

(6) Limited Partnership (LP). If only some of the Partners will be held responsible for the Partnership’s debts or expenses then mark the second checkbox statement to define this Partnership as a Limited Partnership. In addition to marking this checkbox produce a roster of the of the General Partners who shall bear this Partnership’s liabilities. By selecting this option, the General Partners will bear the brunt of liability while those left unnamed in this selection will be considered Limited Partners who will not be assigned full liability for the debts or expenses of the Partnership.

(7) Limited Liability Partnership. If every Partner agrees, then this document can be set to assign the liability earned or caused by a specific Partner strictly under that Partner’s responsibility. If so then select the third checkbox statement to define Statement (B) as a Limited Liability Partnership. Choosing this status will mean that each Partner will be wholly responsible for any costly errors in judgment or intentional wrongdoing on his or her part that creates a liability for the Partnership.

(8) Limited Liability Limited Partnership. This Partnership can assign the liabilities and debts accrued by the Partnership to the General Partners while still holding Limited Partner responsible for creating debts or expenses responsible for such liability (but) to a lesser degree. Select the fourth checkbox to classify this Partnership as a Limited Liability Limited Partnership where General Partners will bear the brunt of liability the Partnership causes but still hold a Partner causing such liability responsible for correcting the issue.

(9) Business Purpose. Dispatch the formal purpose of why this Partnership was formed. This can be explained as the goals of this Business (i.e. a sports equipment manufacturer), a description of the industry it will operate in, and how it will operate (i.e. wholesale, retail, for-profit, non-profit statement, etc.).

(10) Start Date. Statement D shall seek a definition to the “Term” of this Partnership. Begin by dispensing the first date that the Partnership must or can begin operating as this agreement dictates.

Select Item 11 Or Item 12 To Define The Partnership Term

(11) Partnership Life-Span. Now that the first date of this Partnership’s operation has been set, when and/or how it dissolves must be defined. If this Partnership shall exist at the will of the Partners with no set termination date or event, then mark the “In-Perpetuity” checkbox in Statement D.

(12) For A Fixed Life-Span. If these Partners agree that this Partnership should only operate for a limited amount of time then select the second checkbox. In addition to marking this checkbox, t will be necessary to establish the predetermined date of termination defining when this Partnership will naturally dissolve by supplying the formal date of termination or dissolution where requested.

II. The Partners

(13) Partner 1. Each Partner entering this agreement to form a Partnership must be identified with some basic facts beginning with his or her entire name. This applies if the Partner is a Business Entity as well. Thus, supply Partner 1’s full legal name where requested.

(14) Mailing Address. The mailing address of Partner 1 is also required when identifying this Party. This address must be well monitored and must be a reliable method for reaching Partner 1 by mail.

(15) Percentage Of Ownership. Document the percentage of the Partnership this document forms that Partner 1 will own.

(16) Capital Contributions. The amount that has been contributed for the formation of this Partnership, including its start-up costs and tax requirements by Partner 1 should be furnished when identifying a Partner. Furnish Partner 1’s “Capital Contributions” to complete Statement (B) in the section devoted to “Partner 1.”

(17) Signing Authority. Lastly, whether a Partner has the right to commit the Partnership to contracts by signing on behalf of the Partnership should be established. Statement C, in “Partner 1,” provides a “Yes” and “No” checkbox. If Partner 1 may sign a binding contract on behalf of the Partnership, then mark the “Yes” box otherwise, mark the second checkbox (“No”) to indicate that Partner 1 may not commit the Partnership to a contract.

(18) Partner 2 Name And Mailing Address. Naturally, there must be at least two Parties to form a Partnership. Now that Partner 1 has been defined, locate the section titled “Partner 2” then furnish the Second Partner’s entire name and mailing address to the spaces provided.

(19) Percentage Of Partner 2 Ownership. The percentage that Partner 2 shall own of the Partnership should be dispatched to Statement (A) in “Partner 2.”

(20) Capital Contributions Of Partner 2. Define the dollar amount that Partner 2 has supplied for the formation and start-up of the Partnership.

(21) Signing Authority Of Partner 2. If the Second Partner has the right to enter this Partnership into a contract by signing legal documents on behalf of the Partnership then select the “Yes” checkbox from Statement (C). If this is not the case and this power will be forbidden from Partner 2, then mark the “No” checkbox.

(22) Partner 3 Identity And Mailing address. This form provides enough room for three Partners to be established. If there are more, then each one must be named in this section which can be accomplished through an attachment or by simply inserting an additional area to Article II with the required (labeled) information. If there will be a Third Partner, then present this Party’s legal name and official address to the first two spaces in “Partner 3.” If there will only be two Partners, then make sure the information above is correct then, remove or cross out the section labeled “Partner 3.” It will be assumed that three Partners will make up this Partnership, thus continue to the next item after identifying Partner 3.

(23) Partner 3 Ownership. The ownership percentage that should be held by Partner 3 should be established in this agreement to when defining this Party.

(24) Partner 4 Capital Contribution. The dollar value of Partner 3’s “Capital Contribution” to this Partnership should be supplied to Statement (B)

(25) Partner 3 Authority. If a Third Partner has been named, then Statement (C) in Partner 3’s section must be used to establish whether this Party has the authority to enter the Partnership into an agreement by signing a contract as an Authorized Signature Representative of the Partnership. If so, then select the “Yes” box. If not, then select the “No” box.

III. Voting

Select Item 26 Or Item 27 To Define A Partner’s Voting Power

(26) Ownership Voting Determination. Article III shall deal with how much voting power the Partners named above possesses. If the voting power a Partner possesses will be in direct proportion to his or her percentage of ownership of the Partnership then select the “Ownership” checkbox.

(27) Equal Vote Determination. If each Partner’s vote holds equal value with the other regardless of the level of ownership a Partner holds in the Partnership, then select the second checkbox.

Select Item 28, Item 29, Item 30, Or Item 31 To Define Voting For Partnership Changes

(28) Majority Vote. There may be instances when a change to the Partnership is requested or required. For example, one Partner may wish to sell part of his or her ownership to another Party (Partner or otherwise). If changes in the Partnership’s structure will only require a positive vote of the majority of Partners, then select “Majority Vote” from Statement (B) “Changes To The Partnership.” If this is not the type of voting process that should be used to determine changes in the Partnership’s structure, then leave this checkbox unmarked and review the remaining choices.

(29) 2/3 Vote. If only two-thirds of the vote from the Partners will be needed to change the structure of the Partnership, then select the second checkbox from “Changes To The Partnership.”

(30) Unanimous Vote. If the structure of the Partnership being formed can only be changed when every Partner votes in support of the change then select the “Unanimous Vote” definition from “Changes To The Partnership.”

(31) Other. If there will be another way, “Other” than those above, that will determine how a change in the Partnership will be determined or voted upon by the Partners, then select “Other” and produce a specific manner in which such a vote will be conducted successfully.

Select Item 32, Item 33, Item 34, Or Item 35 To Define Accounting Audit Voting

(32) Majority Vote. There will likely be times when one or more Partners calls for an “Accounting Audit.” The way this is determined will need to be discussed. Select the first checkbox under “Accounting Audits” if a “Majority Vote,” where even a slim majority of Voting Partners can successfully call for an audit, will be the manner by which an audit is approved. If this will not be the case then leave this checkbox unmarked.

(33) 2/3 Vote. If 2/3 of the Voting Partners can successfully call for an audit, then select the second checkbox from “(C) Accounting Audits.” This will require an “Accounting Audit” to be pursued even if a full third of the Partners vote against it”

(34) Unanimous Vote. If an Accounting Audit can only be called for by all the Partners voting for it, then select the checkbox labeled “Unanimous Vote.”

(35) Other. If none of the previous items can accurately define how an accounting audit can be called for in a vote by the Partners, then select “Other.” Use the space available in this selection to report precisely what the Partners must do to call for an audit.

IV. Partner Duties

Select Item 36, Item 37, Or Item 38 To Define Partnership Duties

(36) Costs And Expenses Based On Ownership Interest. It will be necessary to define how the “Costs And Expenses” of operating the Partnership will be absorbed by the Partners. This agreement can be used to obligate each Partner to pay the percent of this Entity’s expenses based on how much of the Partnership that Partner owns. To set the responsibilities of paying the Partnership’s costs of operation to be proportional to a Partner’s ownership of the Business, mark the first checkbox in “Costs And Expenses.”

(37) Costs And Expenses Owed By All Partners Equally. If preferable, each Partner can be held equally responsible in paying for the “Costs And Expenses” of the Partnership. To make sure each Partner pays the same amount of money to cover the Partnership’s operating expenses, select the second statement in “Costs And Expenses.” Generally, this will require that all Partnership costs will be added to a single figure then divided equally by the number of Partners to determine how much each will pay to maintain the Partnership’s business operation

(38) Other. If neither of the choices presented can be used to establish the responsibilities the Partners have to meet the costs and expenses of this Partnership, then mark the checkbox labeled “Other.” This requires that directions on how the Partners will handle the expenses of the Partnership be documented on the blank line after the label “Other.”

Select Item 39 Or Item 40 To Address Conflicts Of Interest

(39) Conflict Of Interest Forbidden. Select the first checkbox under “(B) Conflict Of Interest” if all Partners should be forbidden from engaging in any businesses or business activities outside and separate from the Partnership but can be demonstrated to be similar to the Partnership.

(40) Conflict Of Interest Tolerated. If the Partners may engage in business activities, or even a Business Entity, that holds similarities with Partnership’s operations or trade then select the second checkbox under “Conflict Of Interest.” This selection will enable a Partner to pursue similar business opportunities as those present in the Partnership.

Select Item 41 Or Item 42 To Define Management In Partnership

(41) Specific Partner Management. Naturally, the decision-making powers of the Partners in the day-to-day operations of the Partnership should also be determined and documented in this form. If only “Specific Partners” will have the authority to make day-to-day operating decisions of the Partnerships, then place a mark in the “Specific Partners” checkbox and (on the space provided) document the full name of each Partner with the authority to make and execute day-to-day operating decisions for the Partnership.

(42) All Partners Manage. If every Partner possesses the authority to make decisions governing the Partnership’s day-to-day activities, then a mark must be placed in the “All Partners” checkbox

Select Item 43, Item 44, Or Item 45 To Define Partner Work Requirements

(43) No Work Requirement On Partners. If none of the Partners will be required to work for the Partnership either as Employees or on a Contractual basis, then the “No Partners” checkbox must be selected from “Work Requirements.”

(44) Specific Partners Managing. Mark the second checkbox if “Specific Partners” must work for the Partnership. If this is the case, then every Partner this agreement obligates to work for the Partnership must be presented in the space provided. Bear in mind that the specifics of such employment will be beyond the scope of this agreement and should be documented in a separate agreement between the obligated Partner(s) and the Partnership.

(45) Work Requirements On All Partners. If this agreement should require that each Partner work for the Partnership, then the “All Partners” checkbox must be selected. It is strongly recommended that, if this is the case, a separate contract detailing the conditions of employment for such work be developed and executed separately for each Partner and the Partnership.

(46) Voluntary Withdrawal Allowed. The number of days that a Partner must give the Partnership before withdrawing, exiting, or leaving the Partnership must be documented in “E. Voluntary Withdrawal.

V. Organizational Matters

Select Item 47 Or Item 48 To Define Profit Distribution To Partners

(47) Profit Distribution Based On Percentage. The way the profits made by the Partnership will be distributed among the Partners should be handled by this agreement. If a Partner’s share of the profits will be directly proportional to his or her level or percentage of ownership then the first checkbox under Statement “(A) Profit Distributions”

(48) Custom Profit Distribution. If the profits of the Partnership will be distributed among the Partners according to a specific tiering system, then select the “Custom Percentages” checkbox. In addition to making this selection, the name of each Partner and the percentage (or shares) of the profits that he or she is entitled to from the Partnership should be provided to the space available.

(49) Buying Out A Terminating Partner. The number of days given as notice by a Departing Partner to the Partnership to buy out his or her ownership of the Partnership must be documented on the blank line in Statement (i).

(50) Right To Refuse Buying Out Terminating Partner. In a case where the Partnership will not buy out a Departing Partner, then each Remaining Partner must be given notice of the Partnership’s refusal. Record the maximum number of days’ notice when each Partner must receive notice that the Partnership shall not buy out a Departing Partner. This will allow each Remaining Partner to buy out the Departing Partner (independently) if desired

Select Item 51 Or Item 52 To Define The Meeting Schedule

(51) Regular Meetings. This agreement must define how meetings will be scheduled by the Partners. If there will be regularly “Scheduled Meetings” then select the first checkbox from Statement (C). Additionally, indicate how often the regularly scheduled meetings will occur by placing a mark in the checkbox labeled “Weekly,” “Monthly,” “Quarterly,” “Annually,” or, if none of these are accurate, “Other.” Note that if the meetings will be scheduled according to some “Other” schedule, then this schedule should be provided when marking the “Other” checkbox.

(52) Meetings Only When Needed. If the Partners will only hold partnership meetings when necessary and by request, then select the “Meetings Only When Needed” checkbox.

Select Item 53, Item 54, Or Item 55 To Establish Partner Right To Call Meetings

(53) Any Partner. If any Partner can call for a meeting, even outside of a regular schedule, then select the “Any Partner” checkbox from the “Special Meetings” section.

(54) Specific Partners. Choose the “Specific Partners” checkbox if only certain Partners have the authority to call for a meeting. The name of each Partner holding this authority must be presented to the space this option provides.

(55) Other. If the choices presented in this section do not adequately discuss which Partners may call a special meeting, then choose the “Other” checkbox. Once done, describe the qualifications a Partner must meet to call for special meetings, the conditions that may be imposed, and the Partners that are affected or hold this power.

(56) Tax Year End. Record the final date of the Partnership’s Tax Year.

(57) Deadline For Capital Contributions. Declare the date when any and all capital contributions that each Partner is responsible to pay must be received by the Partnership.

Select Item 58 Or Item 59 To Establish Accounting Method

(58) Accrual Based Accounting Required. Indicate if this Partnership’s accounting records will be maintained on an accrual basis then select the first checkbox

(59) Cash-Based Accounting Methods. Indicate if this Partnership’s accounting records will be maintained on an accrual basis then select the first checkbox. This will allow the Partnership to make logical and reasonable assumptions on capital that is being processed to and from the Partnership but has not been physically received or paid. A good example of this is the wait required for a check to clear and the funds to physically transfer from the Check Holder’s account to that of the Payee.

(60) Annual Report Requirement. Select each type of yearly report that the Partnership must dispense to each Partner from the list provided in Statement (H) “Annual Reports”. In this way, this agreement may call for the delivery of a yearly “Balance Sheet,” “Income Statement,” “Cash Flow Statement” and/or “Profit and Loss Summary” for each Partner as generated by the Partnership. Place a mark in the checkbox corresponding next to each type of “Annual Report” the Partnership must deliver to each Partner to summarize its activities during the course of one year. Any type of report that has not been selected from this list will not be considered a required annual report by this agreement.

XIII. Governing Law

(61) Ruling State. Identify the State that shall govern this Partnership, this agreement, and the way the Partnership operates in “XIII. Governing Law.”XVI. Additional Terms.

(62) Provisions Of Partnership. Produce a record of every agreement made by the Partners in forming this Partnership that has not been documented thus far. Only the conditions and the terms that are present with this document at the time of signing and recognized as a part of this agreement by the Signature Partner before execution will be considered part of this contract. Article XVI provides the space needed for such additional provisions and will allow for more space to be inserted as needed. If preferable, all such additional provisions to this Partnership may be placed in an attachment that is named in this article.

(63) Partner 1 Signature. The First Partner identified in this document, Partner 1, must sign and print his or her name to agree to the conditions and terms of the Partnership defined above. If the Partner is a Business Entity, then a Signature Representative that is elected by its Board, Managers, or similar Ruling Body may sign this document on behalf of the Partner. After signing, the Signature Representative for Partner 1 will be obligated to print his or her name as well as the title held with the Partner Company on the “Print Name” line.

(64) Signature Date. The calendar date that Partner 1 signed his or her name must be documented.

(65) Partner 2 Signature. The Second Partner named in the First Article may only participate in this agreement if he or she has signed and printed his or her full name.

(66) Signature Date. Immediately after completing the signature requirement, Partner 2 must submit the current date.

(67) Partner 3 Signature. All the Partners identified in the First Article must acknowledge this agreement by signature. Therefore, a space for a Third Partner to sign his or her name and print his or her name has been provided. If there are more than three Partners, make sure each one is properly named and identified in the First Article and that each one completes the signature requirements of this paperwork

(68) Signature Date. Each Partner must not only sign his or her name and print it, but must also document his or her date of signature. The signature area reserved for Partner 3 provides a space where he or she must meet this requirement.