Creating a Partnership Agreement
Put the terms of your partnership in writing to protect your business.
If you and your partners don't spell out your rights and responsibilities in a written partnership agreement, you'll be ill-equipped to settle conflicts when they arise, and minor misunderstandings may erupt into full-blown disputes. In addition, without a written agreement saying otherwise, your state's laws will control many aspects of your business.
How a Partnership Agreement Helps Your Business
A partnership agreement allows you to structure your relationship with your partners in a way that suits your business. You and your partners can establish the shares of profits (or losses) each partner will take, the responsibilities of each partner, what will happen to the business if a partner leaves, and other important guidelines.
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Each state (with the exception of Louisiana) has its own laws governing partnerships, contained in what's usually called "The Uniform Partnership Act" or "The Revised Uniform Partnership Act" (or the "UPA" or "Revised UPA"). These statutes establish the basic legal rules that apply to partnerships and will control many aspects of your partnership's life unless you set out different rules in a written partnership agreement. (To find your state's partnership statutes, see Nolo's State Laws page.)
Don't be tempted to leave the terms of your partnership up to these state laws. Because they were designed as one-size-fits-all fallback rules, they may not be helpful in your particular situation. It's much better to have an agreement in which you and your partners state the rules that will apply to your business.
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