How to write a general partnership agreement.
Learn the key elements that every partnership agreement should have.
General partnership agreements, also known as business partnership agreements or simply partnership agreements, establish legally enforceable rules for partners starting a business together. From roles and responsibilities to ownership stakes and decision-making strategies, a general partnership agreement should anticipate, address, and resolve virtually any type of business dispute that arises.
Five key general partnership agreement elements.
When you and your partner(s) are developing your general partnership agreement, make sure you discuss, agree on, and include the following components:
- General information: Include all partners’ names, the business name, and the purpose of the business partnership. Also, set the date on which you want the partnership to formally go into effect.
- Contributions: Specify each partner’s initial capital contribution: the amount of money each partner is investing in the partnership. Usually, general partnership agreements also set a contribution deadline for depositing initial capital contributions.
- Ownership: Enter each partner’s ownership percentage in the partnership. As a rule, general partnerships split ownership equally among partners.
- Profits and losses: Map out how the partnership will divide profits and losses — and how often any profits will be distributed to partners. It’s a good idea to provide the option of retaining earnings to reinvest into the partnership, especially in the early stages of your business.
- Decision-making and management: Indicate how you will make business decisions, and keep in mind that it’s a best practice to avoid any possibility of a tied vote. This scenario would typically arise if you have an even number of partners and require a majority vote to make business decisions.
Consult a legal expert before developing your general partnership agreement to ensure it is airtight, comprehensive, and meets your own business needs.