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Learn more about Partnership Agreements

If you are ready to go into business with one or more partners, it may be time to make a Partnership Agreement. With a Partnership Contract, you can outline the terms of your new business relationship. You will be able to list all partners to the agreement as well as their contribution amounts, ownership interest percentages, cost share, profit share, and responsibilities.

Learn how to use our free Partnership Agreement template to outline the terms of your business engagement in this informative guide.

"The main item people overlook when forming a partnership is figuring out how the agreement will dissolve or terminate and putting those details in the Partnership Agreement. It isn’t easy to think or talk about how something will end while everyone is excited to get a venture started, but it is important."

Kevin Sanderson, Esq.

Rocket Lawyer On Call® Attorney

Jump to guide content

What is a Partnership Agreement?
Business Partnership vs. LLC or Joint Venture
Do I need a Partnership Agreement?
Examples of Partnerships
Sample Partnership Agreement template
What information is included in a Partnership Agreement?
How to make a Partnership Agreement using Rocket Lawyer
What should I do after making a Partnership Agreement?
Common questions about Partnership Agreements
Legal glossary: Partnership Agreement terms explained

What is a Partnership Agreement?

A Partnership Agreement is an agreement between one or more businesses or individuals. These parties are choosing to run a business together. Usually, each member will bring to the business initial contributions such as capital, intellectual property, real property, or manufacturing space. Partnership Agreements define the initial contribution and future contributions that are expected of the partners. The document also relates how business decisions are made, how to decide partnership percentages, how the business will be managed, how it may dissolve, and more.

Other names for a Partnership Agreement: General Partnership Agreement, Business Partnership Agreement, Partnership Contract

Business Partnership vs. LLC or Joint Venture

Unlike a Limited Liability Company (LLC), a business partnership does not protect the partners from being personally liable if legal action occurred. Another key difference is a partnership requires multiple members while single member LLCs are allowed.

Joint ventures, on the other hand, are agreements between individuals or businesses with the goal of completing one project. They are often limited to that one objective and also usually have an end date. Whereas, partnerships are formed to run a business.

Joint ventures are often formed to:

Improve the odds of winning a bid
Increase market access
Lower development costs
Complete one project or event

Do I need a Partnership Agreement?

A Business Partnership Agreement helps to outline the terms of a new business partnership. Without a Partnership Agreement in place, partners may find themselves in disagreement about running a business. A written Partnership Agreement that outlines basic business practices alleviates future conflicts before they start.

If you have questions about forming a business partnership, ask a lawyer.

Examples of Partnerships

Often, partnerships are formed in the following circumstances:

Accounting firms
Law firms
Architectecture firms

Sample Partnership Agreement template

Making a Partnership Agreement with Rocket Lawyer is easy. Here's an example of what your finished document might look like:

PARTNERSHIP AGREEMENT

This Partnership Agreement (the "Agreement") is made and entered into this July 01, 2019 (the "Effective Date"). The Partners in this Agreement are as follows:

Barry Costello
Regina Johnson

The Partners to this Agreement agree to the following:

I. NAME

This Partnership will be known as BC & RJ Partnership (the "Partnership").

II. THE PARTNERSHIP

The Partners wish to become legal partners in business.
The terms and conditions of their Partnership will be outlined in this Agreement.
If the Agreement is executed, the Partnership will be in effect on July 01, 2019.
The Partnership will only be terminated as outlined in this Agreement.
The Partnership's primary place of business will be 555 Broker St., Thousand Oaks, California, 91319.
The Partnership will be governed under the laws of the state of California.
The Partnership's primary purpose is Secure a bid for a construction contract on a new high rise building in Los Angeles, CA.
If applicable, the Partners will obtain any necessary licenses and permits to do business, register its Doing Business As Name ("DBA"), and obtain a Federal Employer Identification Number ("EIN").

III. CONTRIBUTIONS

The Partners will make an initial contribution to the Partnership as follows:

Barry Costello: $100,000.00
Regina Johnson: $300,000.00

Contributions will be submitted no later than July 15, 2019. All capital contributions are final unless all partners give written consent of withdrawal. All contributions will be deposited into a joint capital account.

IV. INTEREST AND AUTHORITY

The Partners' ownership interest in the Partnership will be as follows:

Barry Costello: 25%
Regina Johnson: 75%

The Partners' authority will be defined by the following unless otherwise stated in the Agreement: All decisions for contract or otherwise will be made based on a majority vote of percent of ownership. Each Partner will have the authority based on their percent ownership outlined above in the Agreement.

The Partnership qualifies and agrees to opt out of appointing a partnership representative under 26 U.S. Code § 6221.

V. COSTS

The Partners will share costs according to the following percentages:

Barry Costello: 25%
Regina Johnson: 75%

VI. PROFITS

The Partners will share the net profits of the Partnership according to the following percentages:

Barry Costello: 25%
Regina Johnson: 75%

The Profits will be accounted by Steven Wilshire, CPA and distributed on the the 1st and the 15th of the month according to the above percentages after the costs of the Partnership have been paid according to the above cost percentages.

VII. SALARY

All Partners must give their unanimous consent if a permanent salary is to be established and their unanimous consent for the amount of salary to be given to each Partner.

VIII. ACCOUNTING

All accounts related to the Partnership including contribution and distribution accounts will be audited upon a majority vote of the Partners.
All Partners will maintain a joint contribution account. All Partners will maintain a joint distribution account. Partners will keep accurate and complete books of account for all accounts related to the Partnership. Any Partner, whether majority or minority, will be allowed to review all books of account at any time they request.
Each Partner will be responsible for his or her own taxes on any distributions made.
Accounting records will be kept on a cash basis.
The fiscal year will be complete on the last day of December of each year. All Partners will present their position on the state of the Partnership within two weeks of the completion of each fiscal year.
The following partners will be able to sign checks from any joint Partner account:
Barry Costello
Regina Johnson

IX. NEW PARTNERS

The Partnership will amend this agreement to include new partners upon the written and unanimous vote of all Partners.

The name of the Partnership may be amended if a new Partner is added to the Partnership upon the written and unanimous vote of all Partners.

X. WITHDRAWAL OR DEATH

The Partners hereby reserve the right to withdraw from the Partnership at any time. Should a Partner withdraw from the Partnership because of choice or death, the remaining Partners will have the option to buy out the remaining shares of the Partnership. Should the Partners agree to buy out the shares, the shares will be bought in equal amounts by all Partners. The Partners agree to hire an outside firm to assess the value of the remaining shares. Only upon the partners' unanimous agreement will the outside firm's valuation of the shares be considered final. The Partners will have 30 days to decide if they want to buy the remaining shares together and disperse them equally. If all Partners do not agree to buy the shares, individual Partners will then have the right to buy the shares individually. If more than one Partner requests to buy the remaining shares, the shares will be split equally among those Partners wishing to purchase the shares. Should all Partners agree by unanimous vote, the Partnership may choose to allow a non-Partner to buy the shares thereby replacing the previous Partner.

If no individual Partner(s) finalize a purchase agreement by 30 days, the Partnership will be dissolved.

The name of the Partnership may be amended upon the written and unanimous vote of all Partners if a Partner is successfully bought out.

XI. DISSOLUTION

Should the Partnership be dissolved by majority vote, the Partnership will be liquidated, and the debts will be paid. All remaining funds after debts have been paid will be distributed based on the percentage of ownership interest outlined in this Agreement.

XII. AMENDMENTS

Amendments may be made hereto upon the unanimous and written consent of all Partners.
Amendments must be expressly written and have the original signatures of all Partners.
All amendments, notices, requests, claims, demands and other communications between the parties shall be in writing. All such written communications shall be given (i) by delivery in person, (ii) by a nationally recognized next day courier service, (iii) by first class, registered or certified mail, postage prepaid, (iv) by facsimile or (v) by electronic mail to the addresses of the parties specified in this Agreement or such other addresses specified in writing. All notices shall be effective upon (i) receipt by the party to which the written communication is given, or (ii) on the 5th day following mailing, whichever occurs first.

XIII. DISPUTE RESOLUTION

The parties will attempt to resolve any dispute arising out of or relating to the Partnership or this Agreement through friendly negotiations amongst the parties. If the matter is not resolved by negotiation, the parties will resolve the dispute using the below Alternative Dispute Resolution (ADR) procedure.

Any controversies or disputes arising out of or relating to this Agreement will be submitted to mediation in accordance with any statutory rules of mediation in the state of California. If mediation is not successful in resolving the entire dispute or is unavailable, any outstanding issues will be submitted to final and binding arbitration under the rules of the American Arbitration Association. The arbitrator's award will be final, and judgment may be entered upon it by any court having proper jurisdiction within the state of California.

IN WITNESS WHEREOF, this Agreement has been executed and delivered in the manner prescribed by law as of the Effective Date first written above.

Signature:_________________________________ Date:_________________________

Barry Costello

Signature:_________________________________ Date:_________________________

Regina Johnson

Rocket Lawyer's free Partnership Agreement template is completely customizable. Just answer a few questions and we'll take care of the rest.

What information is included in a Partnership Agreement?

Making a Partnership Agreement using Rocket Lawyer's document builder is simple; however, it will be even easier if you gather a bit of information ahead of time. Before building the agreement, you'll need to discuss a few important details with your partners.

Here are some examples of information you'll need:

Contact information

Contact information for the person organizing the partnership. You'll also need the contact information for the business itself, including the mailing address for the company if it is different than the physical location.

Name of the new partnership

You will need the legal name as well as the trade or business name if you have one.

Business details

You will be asked when your business will begin operation, how many employees you expect to have and the estimated revenue. The form will also ask you what the business does.

Partnership details

You will need the contact information for the partners, their percentage of ownership and how much their contribution will be. You can also include information on non-partner employees who may contribute significant skills in exchange for compensation.

Tax responsibility

You can define in the document who will be responsible for tax matters. It will also ask you when your fiscal year ends.

Voting rights

You will need to decide how voting rights will be distributed. Partners will also need to decide how much of a vote is required to make business decisions.

Ending date

Partnerships do not have to last indefinitely. You can form a short-term partnership with a specific ending date or one that operates until you decide to dissolve it.

Withdrawal of partnership

You'll need to define how a partner can leave the company and what happens if a partner dies. The document also includes a non-compete section.

Benefits

In this section, you can define what benefits may be offered such as health care or life insurance.

Professional services

You will be asked to list professional services the company may be using such as accountants and lawyers.

Rocket Lawyer Founder & Ceo,<br>Grobecker Holland International

Teresa G. | Founder & Ceo,
Grobecker Holland International
Rocket Lawyer Member since 2014

Ready to make your free Partnership Agreement?

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How to make a Partnership Agreement with Rocket Lawyer

To make a Partnership Agreement using the Rocket Lawyer document builder, just choose the state you want to form the partnership in and answer the questions asked by the app. Most people are able to make their Partnership Agreement in ten minutes or less.

As a Rocket Lawyer Premium member, you can access, copy, edit, and email your Partnership Contract directly from your account. Your document can also be electronically signed or downloaded in PDF or Word format.

What should I do after making an a Partnership Agreement

After your Partnership Agreement is completed, you should consider the following next steps:

Make It Legal™

Each Partnership Agreement comes with a Make It Legal™ checklist of actions that you'll need to take to finalize your document. This can include anything from getting it signed by all partners to ensuring that you have enough copies to distribute.

Carefully review your document before signing it

A Partnership Agreement creates a significant business relationship between you and another party. With that in mind, it is critical to review the contract to make sure you agree with all of the details and duties specified.

Ask a lawyer

If you have any doubts or concerns about what has been outlined in your Partnership Contract, ask a lawyer, and a Rocket Lawyer On Call® attorney will reply to your legal question with a personal response. Most questions receive a response within 4 business hours. As a Premium member, you also have access to document review and a free 30-minute consultation on each new legal matter. Premium members who need more assistance can save up to 40% on legal fees when hiring a lawyer from our On Call network.

Sign electronically

Easily sign and send your Partnership Agreement out for an online signature from your business partner(s). You may also print out a hard copy of your contract in Word or PDF format. No witnesses or notarization are required when signing a Partnership Agreement.

Distribute copies

Keep a copy of your Partnership Contract for your records and ensure that your business partner also has a copy.

Make more business legal documents

Access dozens of legal forms made for running your business, including

our Business Contract template, NDA and Employment Contract. As a Rocket Lawyer Premium member, you can make unlimited copies and edits of any business legal document, or manage your personal affairs with legal documents like a Power of Attorney or Bill of Sale.

Common Questions about Partnership Agreements

Can a Partnership Agreement be verbal?

A Partnership Agreement, in its essence is a contract, therefore it can be agreed to orally. However, like any contract it is best if it is in writing in case disputes arise on any details or material facts. A written business partnership agreement helps ensure that all parties involved are aware of all

Can a Partnership Agreement be modified or changed?

Yes, a partnering agreement can be modified or changed with a simple partnership agreement amendment. The amendment is a written copy that details that are being modified. This is also called a Partnership Addendum.

How do partnerships file business taxes?

Partnerships are considered a "pass-through" entity. This type of business "passes" tax responsibility to the partners and they must claim profit, losses and distributed income on their individual tax return. Partners must also file a Schedule SE and a K-1 with the IRS and are responsible for their own Social Security and Medicare payments. Often partners will pay quarterly estimated taxes to help spread out their tax payments.

Do we need to file our Partnership Agreement?

No, in most states you do not. A Partnership Agreement is an agreement between the partners. You do need to file to obtain a business license, DBA, EIN or other documents. But the Partnership Agreement may not need to be filed with a government agency. Refer to your local and state laws to see if you are required to file your Partnership Agreement.

Can a partnership own assets or property?

Yes, it can. The assets or property can be owned by the partnership. The assets are not owned by the individual partners but rather by the business.

What is a Tax Matters Partner?

This partner is the one who is responsible for representing the business to the IRS. This responsibility can be assigned per year or for the entire length of the Partnership Agreement. This person may prepare and file returns, manage audits, share tax information with other members, and more. The IRS outlines the requirements of the Tax Matters Partner.

What happens if the partnership agreement breached?

Usually, how disputes ( or contract breaches) are managed are outlined in the agreement. In most cases, you'll mediate or arbitrate before going to court to solve your business disputes.

How do you legally dissolve a business partnership?

The partner agreement specifically states how to legally dissolve a business partnership. By using the Rocket Lawyer partner agreement template, you can choose how to dissolve the partnership by choosing how many votes are needed for dissolution of the partnership.

Stay protected with Document Defense®

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Available to Rocket Lawyer Premium members. Terms apply.

Legal glossary: Partnership Agreement terms explained

Amendments

This section of the agreement defines how the contract can be changed if needed.

Contributions

What each partner is contributing to the business. It may include the initial contribution such as start-up capital and ongoing contributions such as office space.

Dispute resolution

In advance, partners agree to how disputes will be resolved. The process for how disputes will be resolved are included in the Partnership Agreement.

Doing Business As (DBA)

A DBA is used if you choose to run your business by a title other than your name. It's simple to file for a DBA. You'll need a DBA to open a business banking account using the business name. In most situations, any business with more than one member should use a DBA.

Effective date

The dates the contract will be active. You can choose to not define the end date or you can set an end date. If the partnership is being created to complete a specific project, you may know the specific end date. Sometimes a partnership without an end date is called a "partnership at will."

Federal Employer Identification Number (EIN)

An EIN is the number you use to file your taxes. It is similar to a Social Security number, except for your business. You need to have this number if your business consists of more than one person or has employees.

Interest and authority

This section of the Partnership Agreement defines how much "ownership" or interest each partner will have in the company. It also outlines the authority they will have in the company. Authority, in this case, meaning influence and decision-making rights over the company.

Joint distribution account

This keeps the finances of the business transparent. It states that the business must have a joint distribution account and that the books must be available to view by every partner.

Withdrawal or death

This section of the agreement defines how the business manages a situation where a partner wants to leave the company or dies.

Mario Jaramillo, Esq.
Rocket Lawyer On Call® Attorney

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