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What Should be Included in a Partnership Agreement?

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Question: What Should be Included in a Partnership Agreement?
A partnership agreement sets out all the terms and conditions agreed to by the partners. In this document, every possible contingency is included. Here is a list of questions to be asked when preparing a partnership agreement.
Answer:

A partnership agreement should include the following information:

  • Name of the Partnership
  • Name the partnership is doing business as (if different)
  • Term (lenth) of the partnership
  • Purpose of the partnership (also might include partners’ goals)
  • Contributions of each partner, in cash, deferred contributions (installments), property (including intellectual property), and service.
  • What happens if a partner fails to make initial contribution
  • Additional future contributions
  • How profits and losses are distributed (equal, unequal, percentages, etc.)
  • Draws to partners (how determined, limitations, when may draw)
  • Retention of profits for business needs
  • Salaries of partners
  • Management powers and duties, including skills contributed, hours of work
  • How decisions are made
  • Financial matters, including periodic accountings, as requested by a partner
  • Power to borrow money on behalf of partnership
  • Power to authorize expenses, signatures required
  • Meetings
  • Maintenance of records
  • Partner time off, including leaves of absence, vacations, sick leaves
  • Outside business activities (permitted, restricted)
  • Ownership of business assets
  • Transfer of a partner’s interest
  • Sale of partner interest to partnership
  • Buy-sell agreement (specific buy-out methods)
  • Continuity of partnership business when a partner leaves, dies, is terminated
  • Non-competition clause
  • Expulsion of a partner from the partnership
  • Mediation and arbitration
  • Amending partnership agreement (procedure
  • Admitting new partners
  • Adherence to state law
  • Severability
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