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Partnership Agreement Template

By Recording Law Editorial TeamReviewed July 13, 202620 min read
Partnership Agreement Template

A partnership agreement is a binding contract that spells out the rights and responsibilities of every partner. It should address each partner's contributions, profit and loss allocation, management duties, partner authority, withdrawal and death procedures, and dispute settlement. Each state's version of the Uniform Partnership Act sets the governing legal framework.

What is a Partnership Agreement?

A partnership agreement is a binding contract between partners that contains the terms and conditions of the partnership. However, before we dig deeper into the nature of a partnership agreement it is important that you first understand what a partnership is.

Generally, a partnership is an agreement between two or more people to contribute money, property, or labor to come up with a common fund and divide the profits among themselves.

Unlike other agreements, the basic foundation of a partnership is trust. All partners have specific obligations to perform which is why a written agreement is essential.

Purpose of a Partnership Agreement

When you enter a partnership your partners will most likely ask you to sign a partnership agreement.

general legal: witness chair in a courtroom with a microphone

Generally, a partnership agreement spells out the rights and responsibilities of every partner. It is the best way to assure that the partners perform each of their responsibilities and ensure that the essence of the partnership is carried out.

In case one of the partners runs away with the partnership money, you can use the partnership agreement to enforce your partner's obligation.

What to Include in Your Partnership Agreement

The following is a list of provisions that most partnership agreements cover.

Name of partnership. You need to agree on the name of your partnership which can be a combination of your names or a fictitious business name such as "Westside Home Repairs."

Contributions to the partnership. It is important that you put into writing whatever you have contributed and the percentage share for every partner.

Allocation of profits, losses, and draws. This explains how you will divide the profits and losses among yourselves.

Partner's authority. You can indicate in your partnership agreement that each partner cannot bind the partnership without the consent of the other partners.

Partnership decision-making. What if you cannot agree on a certain matter? This part of your agreement will set the rules as to what constitutes a minority and majority decision.

Management duties. All partnerships are unique. You may assign one partner as a managing partner whose role is solely to manage the business, and go further to explain who should keep the books, deal with employees, or negotiate with suppliers.

Admitting new partners. As your business grows, you may want to bring in new partners. You should agree on a procedure to follow when admitting new partners.

Withdrawal or death of a partner. You should also set up a buyout scheme in case one of your partners withdraws or passes away.

Dispute settlement and jurisdiction. You should include how you will settle disputes and which court would have jurisdiction over your case, especially if a partner is located out of state.

A general-purpose partnership agreement template you can adapt for your own partnership is provided later on this page.

What Is the Uniform Partnership Act?

The Uniform Partnership Act provides governance for business partnerships around the United States. With the exception of Louisiana, every state has adopted some version of the act, which sets the basic legal rules for every partnership formed there. Louisiana governs partnerships through its own Civil Code instead, treating a partnership as a distinct legal entity created by contract.

Knowing your state law is important when drafting your partnership agreement because every agreement needs to comply with state law standards in order to be valid. If you want to set out unique rules in your partnership agreement, make sure they don't conflict with your state's law.

If your agreement is silent on how to divide profits and losses, most states' default partnership rules split them equally among the partners regardless of how much money or work each one contributed. Addressing this directly in your agreement lets you avoid that default outcome.

Do You Need an Attorney to Prepare Your Partnership Agreement?

When drafting your own partnership agreement, you run the risk of not getting the wording right, which is why it is often worthwhile to have your agreement drafted or reviewed by counsel.

An attorney can advise you on the best terms and conditions for the partnership and flag significant consequences you should be aware of before entering into the partnership. If you need to hire an attorney, the American Bar Association's Find Legal Help directory is a free way to locate one in your state.

A free, general-purpose partnership agreement template is provided below to help you get started.

Partnership Agreement Template

This PARTNERSHIP AGREEMENT (the "AGREEMENT") is entered on this ( date ) day of ( month ), ( year ), by and between ( First Partner's Complete Name ), ( Second Partner's Complete Name ), and ( additional partners, if any ).

SECTION I: Functions of the PARTNERSHIP

All of the PARTNERS shall:

  • Form a general partnership (the PARTNERSHIP) for the purpose of ( purpose of the partnership ), in accordance with the LAWS of ( State ).
  • The PARTNERSHIP shall operate under the name of ( Partnership Name ).
  • The PARTNERSHIP shall begin on the EFFECTIVE DATE of ( date ).
  • The PARTNERSHIP shall last for a TERM of ( length of term ).
  • The purpose of the PARTNERSHIP is to oversee, manage, and otherwise facilitate the following business functions:
    • ( specific business function )
    • ( specific business function )
    • ( specific business function )
  • No PARTNER may sell or encumber any personal or real property of the PARTNERSHIP without the consent of all PARTNERS.
  • Meetings between the PARTNERS shall be held every ( frequency ) for the duration of the PARTNERSHIP AGREEMENT.

SECTION II: Capital

  • The initial CAPITAL contribution from the FIRST PARTY is a total of ( amount ).
  • The initial CAPITAL contribution from the SECOND PARTY is a total of ( amount ).
  • The PARTNERS shall deposit the funds into a SPECIAL BANK ACCOUNT at ( bank name ), of ( city, state ), on ( date ).
  • Any profit or loss resulting from the functions of the PARTNERSHIP shall be deposited and/or withdrawn from the SPECIAL BANK ACCOUNT.
  • Each PARTNER shall provide a BANK ACCOUNT for their own contributions, which profit and/or loss shall transact to/from at ( interval ) intervals, in proportion to the value of their respective contributions.
  • The balance of the SPECIAL BANK ACCOUNT shall constitute the CASH-ON-HAND of the PARTNERSHIP, for all purposes including, but not limited to, taxation and valuation.

SECTION III: Management

  • The PARTNERS designate ( Partner's Name ) as the EXECUTIVE responsible for the day-to-day operation of the PARTNERSHIP.
  • The EXECUTIVE shall see to the maintenance of records and books, consisting of all account balances, assets, liabilities, and all other revenue information pertaining to the PARTNERSHIP.
  • The PARTNERS reserve the right to inspect, audit, or otherwise request access to the records and books of the PARTNERSHIP at any time, in which case the EXECUTIVE shall make the records available on demand.

SECTION IV: Annual Audit

  • The PARTNERS shall conduct a complete and thorough AUDIT of all accounts, records, and books of the PARTNERSHIP on a yearly basis.
  • The PARTNERS shall conduct an annual accounting of the PARTNERSHIP every ( date ).
  • At the request of the PARTNERS, all financial records shall be reviewed a minimum of semi-annually, throughout the year.

SECTION V: Compensation

The PARTNERS shall receive compensation as follows: ( compensation terms ).

SECTION VI: Transfers to a Trust

Any PARTNER may transfer interest in the PARTNERSHIP to a living TRUST, of which the transferring PARTNER is the grantor and sole trustee, upon giving written notice to the other PARTNERS.

SECTION VII: Partner Removal

  • A PARTNER may be removed, as deemed necessary, only by a majority vote of those PARTNERS with a controlling share of the CAPITAL of the PARTNERSHIP.
  • Any such PARTNER shall be notified in writing of their removal.
  • Any PARTNER removed from the PARTNERSHIP shall be paid for all contributions, minus any liabilities incurred, plus any gains or interest they are entitled to, immediately upon removal from the PARTNERSHIP.

SECTION VIII: Partner Withdrawal

  • Any PARTNER may withdraw, in part or in full, from the PARTNERSHIP at any time.
  • Notification of withdrawal must be made in writing.
  • Funds withdrawn from the SPECIAL BANK ACCOUNT of the PARTNERSHIP shall be based on the most recent valuation of the PARTNERSHIP at the time and shall be transferred to the bank account of record of the withdrawing PARTNER.
  • The PARTNERSHIP shall continue to function as a taxable entity so long as enough CAPITAL remains to do so, regardless of the withdrawal of individual PARTNERS.

SECTION IX: Termination

  • The PARTNERSHIP may be terminated by the mutual agreement of the PARTNERS whose capital represents a majority stake in the PARTNERSHIP.
  • Prior to termination of the PARTNERSHIP, all PARTNERS are to be advised in writing that termination is being considered, no fewer than ( number ) days before the termination may take place.
  • Upon the decision to terminate the PARTNERSHIP, all PARTNERS shall be notified by the EXECUTIVE immediately.
  • All assets shall be distributed to all PARTNERS upon the termination of the PARTNERSHIP. Repayment shall correspond to the percentage contributed by each respective PARTNER, except as outlined elsewhere, as applicable.
  • Payments shall be made to the bank accounts of record for each PARTNER upon dissolution of the PARTNERSHIP.

SECTION X: Death of a Partner

  • A PARTNER shall only be considered withdrawn from the PARTNERSHIP upon notification of that partner's death. In case of death, the PARTNERSHIP should be notified within 30 days of the partner's death.
  • At that time, all contributions and all other funds owed to the PARTNER shall be transferred to the designee, agent, or trust of the deceased PARTNER's choosing.

SECTION XI: Payment

  • All withdrawals may be made in cash or securities, or some combination of both, at the discretion of the drawer.
  • In cash transfers, the drawer (or their designated entity) is entitled to an amount equal to the lesser of ( percentage ) of the value of the capital account being withdrawn from, or the value of the capital account being withdrawn, less any costs incurred in the transaction of cash or securities.
  • For securities withdrawals, the PARTNERS shall use a third-party BROKER. The brokerage fees resulting from the withdrawal shall be covered by the drawer.

SECTION XII: Forbidden Acts

For the TERM of this PARTNERSHIP AGREEMENT, no PARTNER may:

  • Obligate or bind the PARTNERSHIP to any function other than those outlined in the AGREEMENT above.
  • Transfer, sell, or loan against their stake in the PARTNERSHIP, except with the consent of a majority of all other PARTNERS, by simple vote.
  • Use the PARTNERSHIP name, likeness, or logo for any purpose other than those written in this AGREEMENT.

This PARTNERSHIP AGREEMENT shall be binding upon the signatures of the PARTNERS.

Partner Signature Date

Partner Signature Date

Partner Signature Date

Partner Signature Date

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Sample Completed Partnership Agreement

The example below shows a completed version of the template above, filled in with sample details, so you can see how each section reads once finished.

general legal: calculator beside printed financial statements on a desk

SAMPLE

This PARTNERSHIP AGREEMENT (the "AGREEMENT") is entered on this 22nd day of August, 2020, by and between Alex Wilson, Patricia Wilson, and Maggie Taylor.

SECTION I: Functions of the PARTNERSHIP

All of the PARTNERS shall:

  • Form a general partnership (the PARTNERSHIP) for the purpose of providing photo and video coverage for weddings, in accordance with the LAWS of California.
  • The PARTNERSHIP shall operate under the name of Events Video & Photography.
  • The PARTNERSHIP shall begin on the EFFECTIVE DATE of October 1, 2020.
  • The PARTNERSHIP shall last for a TERM of 5 years.
  • The purpose of the PARTNERSHIP is to oversee, manage, and otherwise facilitate the following business functions:
    • Provide photo and video coverage for weddings locally
  • No PARTNER may sell or encumber any personal or real property of the PARTNERSHIP without the consent of all PARTNERS.
  • Meetings between the PARTNERS shall be held every January 15 for the duration of the PARTNERSHIP AGREEMENT.

SECTION II: Capital

  • The initial CAPITAL contribution from the FIRST PARTY is a total of two thousand eight hundred dollars ($2,800).
  • The initial CAPITAL contribution from the SECOND PARTY is a total of two thousand eight hundred dollars ($2,800).
  • The PARTNERS shall deposit the funds into a SPECIAL BANK ACCOUNT at Bank of California, of the City of California, on or before October 1, 2020.
  • Any profit or loss resulting from the functions of the PARTNERSHIP shall be deposited and/or withdrawn from the SPECIAL BANK ACCOUNT.
  • Each PARTNER shall provide a BANK ACCOUNT for their own contributions, which profit and/or loss shall transact to/from at 15-day intervals, in proportion to the value of their respective contributions.
  • The balance of the SPECIAL BANK ACCOUNT shall constitute the CASH-ON-HAND of the PARTNERSHIP, for all purposes including, but not limited to, taxation and valuation.

SECTION III: Management

  • The PARTNERS designate Alex Wilson as the EXECUTIVE responsible for the day-to-day operation of the PARTNERSHIP.
  • The EXECUTIVE shall see to the maintenance of records and books, consisting of all account balances, assets, liabilities, and all other revenue information pertaining to the PARTNERSHIP.
  • The PARTNERS reserve the right to inspect, audit, or otherwise request access to the records and books of the PARTNERSHIP at any time, in which case the EXECUTIVE shall make the records available on demand.

SECTION IV: Annual Audit

  • The PARTNERS shall conduct a complete and thorough AUDIT of all accounts, records, and books of the PARTNERSHIP on a yearly basis.
  • The PARTNERS shall conduct an annual accounting of the PARTNERSHIP every 15th of December.
  • At the request of the PARTNERS, all financial records shall be reviewed a minimum of semi-annually, throughout the year.

SECTION V: Compensation

The PARTNERS shall receive compensation as follows: $1,000 to be given every 15th day of the month.

SECTION VI: Transfers to a Trust

Any PARTNER may transfer interest in the PARTNERSHIP to a living TRUST, of which the transferring PARTNER is the grantor and sole trustee, upon giving written notice to the other PARTNERS.

SECTION VII: Partner Removal

  • A PARTNER may be removed, as deemed necessary, only by a majority vote of those PARTNERS with a controlling share of the CAPITAL of the PARTNERSHIP.
  • Any such PARTNER shall be notified in writing of their removal.
  • Any PARTNER removed from the PARTNERSHIP shall be paid for all contributions, minus any liabilities incurred, plus any gains or interest they are entitled to, immediately upon removal from the PARTNERSHIP.

SECTION VIII: Partner Withdrawal

  • Any PARTNER may withdraw, in part or in full, from the PARTNERSHIP at any time.
  • Notification of withdrawal must be made in writing.
  • Funds withdrawn from the SPECIAL BANK ACCOUNT of the PARTNERSHIP shall be based on the most recent valuation of the PARTNERSHIP at the time and shall be transferred to the bank account of record of the withdrawing PARTNER.
  • The PARTNERSHIP shall continue to function as a taxable entity so long as enough CAPITAL remains to do so, regardless of the withdrawal of individual PARTNERS.

SECTION IX: Termination

  • The PARTNERSHIP may be terminated by the mutual agreement of the PARTNERS whose capital represents a majority stake in the PARTNERSHIP.
  • Prior to termination of the PARTNERSHIP, all PARTNERS are to be advised in writing that termination is being considered, no fewer than ( number ) days before the termination may take place.
  • Upon the decision to terminate the PARTNERSHIP, all PARTNERS shall be notified by the EXECUTIVE immediately.
  • All assets shall be distributed to all PARTNERS upon the termination of the PARTNERSHIP. Repayment shall correspond to the percentage contributed by each respective PARTNER, except as outlined elsewhere, as applicable.
  • Payments shall be made to the bank accounts of record for each PARTNER upon dissolution of the PARTNERSHIP.

SECTION X: Death of a Partner

  • A PARTNER shall only be considered withdrawn from the PARTNERSHIP upon notification of that partner's death. In case of death, the PARTNERSHIP should be notified within 30 days of the partner's death.
  • At that time, all contributions and all other funds owed to the PARTNER shall be transferred to the designee, agent, or trust of the deceased PARTNER's choosing.

SECTION XI: Payment

  • All withdrawals may be made in cash or securities, or some combination of both, at the discretion of the drawer.
  • In cash transfers, the drawer (or their designated entity) is entitled to an amount equal to the lesser of 20% of the value of the capital account being withdrawn from, or the value of the capital account being withdrawn, less any costs incurred in the transaction of cash or securities.
  • For securities withdrawals, the PARTNERS shall use a third-party BROKER. The brokerage fees resulting from the withdrawal shall be covered by the drawer.

SECTION XII: Forbidden Acts

For the TERM of this PARTNERSHIP AGREEMENT, no PARTNER may:

  • Obligate or bind the PARTNERSHIP to any function other than those outlined in the AGREEMENT above.
  • Transfer, sell, or loan against their stake in the PARTNERSHIP, except with the consent of a majority of all other PARTNERS, by simple vote.
  • Use the PARTNERSHIP name, likeness, or logo for any purpose other than those written in this AGREEMENT.

This PARTNERSHIP AGREEMENT shall be binding upon the signatures of the PARTNERS.

Alex Wilson Date

Patricia Wilson Date

Maggie Taylor Date

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Frequently Asked Questions

Is a partnership agreement legally required to form a partnership?

No. Under most states' partnership laws, two or more people can form a general partnership simply by carrying on a business together for profit, even without a written agreement. Without one, though, the state's default partnership rules control issues like profit sharing, management authority, and dissolution, which may not reflect what the partners actually intended.

What happens if partners never sign a written partnership agreement?

Most states' partnership acts fill the gap with default rules. A common default is that partners share profits and losses equally regardless of how much money or work each contributed, and that certain decisions require a majority or unanimous vote depending on the matter. A written agreement lets partners set their own terms instead of relying on these defaults.

Does Louisiana follow the Uniform Partnership Act?

No. Louisiana is the only state that has not adopted the Uniform Partnership Act or its revised version. Partnerships formed in Louisiana are instead governed by the state's Civil Code, which treats a partnership as its own legal entity created by contract between two or more people.

Can a partnership agreement be changed after it is signed?

Yes, if all partners agree to the change. Most partnership agreements can be amended in writing with the consent of the partners, as specified in the agreement itself. Any amendment should be documented and signed by all partners to avoid disputes later about what was actually agreed to.

Does a partnership agreement need to be notarized?

Generally, no. A partnership agreement is valid once signed by all partners and does not require notarization in most states. Some partners choose to have signatures notarized or witnessed for extra evidentiary security, but this is optional unless state law or the partners' own internal policy requires it.

Do I need a lawyer to draft a partnership agreement?

A template can cover the basics, but a lawyer can help make sure the agreement addresses liability, dispute resolution, and any state-specific requirements correctly for your situation. Recording Law does not provide legal advice; consult an attorney for advice specific to your situation.

Updates

Corrected 27 links that were stripped down to bare, unclickable URLs by an old WordPress migration bug, removed a dead affiliate banner image and repeated promotional links to a competing document-builder service, removed two dead Microsoft Word download links, replaced a promotional attorney pitch with a citation to the American Bar Association's free lawyer directory, fixed a corrupted meta description that contained a stray affiliate link, reformatted the run-on clause lists in the template and sample into readable bullets with consistent placeholder brackets, fixed several typos and a stray bracket in the template and sample text, added a short explanation of each state's default profit-and-loss rules with a citation, added a note on Louisiana's Civil Code exception with a citation, and added a new FAQ section.

Sources and References

  1. Uniform Law Commission: Partnership Act (1997)(uniformlaws.org)
  2. Louisiana State Legislature: Civil Code Article 2801, Partnership(legis.la.gov).gov
  3. Cornell Law School, Wex: Partnership(law.cornell.edu)
  4. American Bar Association: Find Legal Help(americanbar.org)
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