How to Create a General Partnership Agreement

Consider creating a partnership agreement that is more than a handshake.

If you are starting a general partnership with one or more other people, then you may wish to create a partnership agreement. If a general partnership does not create a partnership agreement, then the law of the state will govern the partnership, even when it comes to such things as how profits and losses are to be split. In order to avoid this, partners can create a detailed partnership agreement that will govern how the partnership will operate, the roles of the partners, how profits and losses are to be split, and what happens when a partnership dissolves.

Instructions

1. State the parties to the agreement and the purpose of the agreement. The beginning of the partnership agreement should list the names of the partners, the name of the company, the purpose of the business, and in which jurisdiction the agreement is being made.

2. Detail the economic concerns of the partners. List the names and addresses of each partner while including the amount of money, property, or time she has, or will, contribute to the partnership. Also state how profits and losses are to be divided, will they be shared equally between all partners or in relation to the amount of each partner's contribution? Also state how the partners will be paid by the partnership and when the partners will be paid.

3. Detail how the partnership will be managed. Focus on how the power is to be split between the partners. Will each partner have the absolute ability to make decisions concerning the partnership, or must there be a vote? If a vote, will it be majority rule or unanimous? Also consider how deadlocks will be resolved. Decide the structure of the business and where all important documents will be maintained.

4. Lay out the plans for changes to the partnership. Determine what will happen when the partnership dissolves. Partnerships dissolve when a partner dies, quits, or is voted out by the other partners—determine what happens next. Will a new partnership be created among the remaining partners, or will the partnership be wound up and the business will cease? Also, determine how new partners will be admitted in the future.

Tips & Warnings

• This article is not legal advice, is not intended to be legal advice, and should not be construed as legal advice. You may wish to consult an attorney when drafting a partnership agreement because each partnership and business is unique, and your partnership agreement may need to include more substantive and detailed information.

References

• NOLO.com: Creating a Partnership Agreement

Resources

• Read this Article in Spanish
• The Uniform Partnership Act