Partnership Agreement

This simple partnership agreement form will help you and your partner specify the rights and responsibilities of each member of the partnership and how you'd like your jointly owned business to work. Use this form to address these important issues and more: 

  • how profits and losses will be allocated
  • how much capital each partner will contribute to the business
  • the process of adding a new partner or transferring a departing partner's business interests

Partners

This Partnership Agreement is entered into and effective as of  . The partners are:

Alternate Selection
Label Contract Text
two , and  (individually and collectively referred to as the Partners).
three , and , (individually and collectively referred to as the Partner(s)).
four , and , (individually and collectively referred to as the Partner(s)).
five ,  and  (individually and collectively referred to as the Partner(s)).
six , and  (individually and collectively referred to as the Partner(s)).

Name of Partnership

The name of the partnership shall be .

Term of the Partnership

Alternate Selection
Label Contract Text
lasts until dissolved The partnership shall last until it is dissolved by all the partners or terminates in accordance with the provisions of this Agreement.
lasts for set term of years The partnership shall commence as of the date of this Agreement and shall continue for a period of  years, at which time it shall be dissolved and its affairs wound up.
lasts until set event occurs The partnership shall continue until , at which time it shall be dissolved and its affairs wound up.

Purpose of the Partnership

The purpose of the partnership is: .

Cash Contributions and Ownership Interest

Alternate Selection

Label Contract Text
equal cash contributions The initial capital of the partnership shall be a total of $. Each partner shall contribute an equal share amounting to $, no later than .
unequal cash contributions

The initial capital of the partnership shall consist of cash to be contributed by the partners in the following amounts and reflecting the following percentage of ownership interest:

Unchangeable Alternate Selection
Label Contract Text
two
  • ; $%
  • ; $%
three
  • ; $%
  • ; $%
  • ; $%
four
  • ; $%
  • ; $%
  • ; $%
  • ; $%
five
  • ; $%
  • ; $%
  • ; $%
  • ; $%
  • ; $%
six
  • ; $%
  • ; $%
  • ; $%
  • ; $%
  • ; $%
  • ; $%

Each partner shall pay the cash contribtion no later than .

Interest on Contributed Capital

Alternate Selection
Label Contract Text
no interest paid No partner shall be entitled to receive interest on any capital contribution.
interest to be paid Each partner shall be entitled to interest on his or her capital contribution. This interest shall be payable annually at a rate agreed to in writing by the partnership. 

Profits and Losses

Alternate Selection
Label Contract Text
equal distribution The partners will share all profits and losses of the partnership equally.
unequal distribution The partnership's profits and losses shall be shared by the partners in the same proportions as their initial contributions of capital bear to each other as set forth in this agreement.

Salaries

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No Salaries No partner will be paid any salary, except those that may in the future be decided on by unanimous written consent of all partners.
Salaries Paid Partners can be paid reasonable salaries for work they perform in the partnership business.
Multiple Selection
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work contributions description

Work Contributions

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All Partners Work in Business All partners shall be actively involved and materially participate in the management and operation of the partnership business.
Contribute Skills Each partner named below shall participate in the business by working in the manner described:
Hours Worked Each partner shall work  hours per week on partnership business.

Decisions and Voting Power

Alternate Selection
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Unanimous All partnership decisions must be made by the unanimous agreement of all partners.
Majority  All partnership decisions shall be determined by majority vote, except as otherwise provided in this Agreement. 
Majority Based on Fixed Percentage All partnership decisions shall be determined by majority vote, except as otherwise provided in this Agreement. The partners shall have the following percentages of voting power:

Financial and Business Matters

Maintenance of Records. Proper and complete books of account of the partnership business shall be kept at the partnership's principal place of business and shall be open to inspection by any of the partners or their representative at any reasonable time during business hours.

Prohibition Against Commingling. All partnership funds shall be deposited only in bank accounts bearing the partnership name.

Multiple Selection
Label Contract Text
Periodic Accountings Periodic Accountings. A full and complete account of the books of the partnership shall be made to the partners on a[n]  basis.
Accounting on Request Accounting on Request by a Partner. Accountings of any aspect of partnership business shall be made upon written request by any partner.
Accountant does Accounting Accountant to Determine Profits and Losses. The partnership's net profit or net loss for each fiscal year shall be determined as soon as practicable after the close of that fiscal year by an accountant chosen by the partners.

Outside Business Activities

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Outside Activity Restricted As long as any partner is a member of the partnership, he or she shall devote his or her full work time and energies to the conduct of partnership business, and shall not be actively engaged in the conduct of any other business for compensation or a share in profits as an employee, officer, agent, proprietor, partner, or stockholder. This prohibition shall not prevent him or her from being a passive investor in any enterprise, if he or she is not actively engaged in its business and does not exercise control over it. Neither the partnership nor any other partner shall have any right to any income or profit derived from any such passive investment.
No Direct Competition Any partner may be engaged in one or more other businesses as well as the business of the partnership, but only to the extent that this activity does not directly and materially interfere with the business of the partnership and does not conflict with the time commitments and other obligations of that partner to the partnership under this Agreement. Neither the partnership nor any other partner shall have any right to any income or profit derived by a partner from any business activity permitted under this section.
No Restrictions It is understood and agreed that each partner may engage in other businesses, including enterprises in competition with the partnership. The partners need not offer any business opportunities to the partnership, but may take advantage of those opportunities for their own accounts or for the accounts of other partnerships or enterprises with which they are associated. Neither the partnership nor any other partner shall have any right to any income or profit derived by a partner from any enterprise or opportunity permitted by this section.
Specific Activities Permitted

The list below specifies business activities that each partner plans or may do outside of the partnership business. Each partner is expressly authorized to engage in these activities if he or she so desires:

Multiple Selection
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Ownership of IP

Ownership of Intangible Business Assets

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Trade Secrets All trade secrets acquired or developed by the partnership, including customer lists and sources of supplies, will be owned and controlled by the partnership.
Patents Any ideas, inventions, or designs, acquired or developed by one or more partners in the course of partnership business and pertaining to partnership business that are the subject of an application for a patent shall be partnership property.
Copyrights All copyrighted materials created, prepared, or acquired in the partnership name are, and shall remain, partnership property. The partnership shall also own all copyrighted works created by the partners during and in the course of partnership business.
Trade Name/Trademark The partnership trade name  and trademarks and service marks (and associated good will) shall be partnership property. In the event of the departure of a partner and/or dissolution of the partnership, control and ownership of the partnership business name shall be determined pursuant to this Agreement.

 

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Managing Partner

Managing Partner

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Full Authority The managing partner shall be . The managing partner shall have control over the business of the partnership and assume direction of its business operations. The managing partner shall consult and confer as far as practicable with the nonmanaging partners, but the power of decision shall be vested in the managing partner. The managing partner's power and duties shall include control over the partnership's books and records. On the managing partner's death, resignation, or other disability, a new managing partner shall be selected by a majority of the partners.
Limited Authority The managing partner shall be . The managing partner shall have control over routine business transactions and day-to-day operating decisions but shall not make any major decisions without the consent of a majority of the partners.
Alternate Selection
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Unlimited Financial All partnership funds shall be deposited in the partnership's name and shall be subject to withdrawal only on the signature of the managing partner.
Limited Financial All partnership funds shall be deposited in the partnership's name and shall be subject to withdrawal only on the signatures of at least   partners, except that a separate account may be maintained with a balance never to exceed $. The amounts in that separate account shall be subject to withdrawal on the signature of the managing partner.

Amendments

Alternate Selection
Label Contract Text
Unanimous This Agreement may be amended only by the written consent of all partners.
Specified Number This Agreement may be amended by  percent.

Admission of New Partner

Admission of a new partner shall not cause dissolution of the underlying partnership business, which will be continued by the new partnership entity.

Alternate Selection
Label Contract Text
Unanimous A new partner or partners may be added to the partnership only by unanimous written consent of all existing partners.
Non-Unanimous A new partner may be admitted to the partnership with the written approval of  percent of the existing partners.

Transfer of a Partner's Interest

Sale to Partnership or Partners at Their Option. If any partner leaves the partnership, for whatever reason, whether he or she quits, withdraws, is expelled, retires, becomes mentally or physically incapacitated or unable to function as a partner, or dies, or if the partner attempts to or is ordered to transfer his or her interest, whether voluntarily or involuntarily, he or she, or his or her estate, shall be obligated to sell his or her interest in the partnership to the remaining partner or partners, who have the option, but not the obligation, to buy that interest.

Refusal of the Remaining Partners to Buy. If the remaining partner or partners do not purchase the departing partner's share of the business under the terms provided in this Agreement, within  days, the entire business of the partnership shall be put up for sale and listed with the appropriate sales agencies, agents, or brokers.

Multiple Selection
Label Contract Text
RIght of Refusal

The Right of First Refusal Upon Offer From Outside. Notwithstanding any other provision in this Agreement, if a partner receives a bona fide, legitimate offer, whether or not solicited by him or her, from a person not a partner, to purchase all of his or her interest in the partnership, and if the partner receiving the offer is willing to accept it, he or she shall give written notice of the amount and terms of the offer, the identity of the proposed buyer, and his or her willingness to accept the offer to each of the other partners. The other partner or partners shall have the option, within  days after the notice is given, to purchase that partner's interest on the same terms as those contained in the offer. If the partner or partners do not purchase the interest, the partner may accept the outside person's offer.

Buy-Sell Agreement (Valuation of Partnership)

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Label Contract Text
Asset-Valuation

The value of the partnership shall be made by determining the net worth of the partnership as of the date a partner leaves, for any reason. Net worth is defined as the market value, as of that date, of the following assets:

  • All tangible property, real or personal, owned by the business;
  • All the liquid assets owned by the business, including cash on hand, bank deposits and CDs, or other monies;
  • All accounts receivable;
  • All earned but unbilled fees;
  • All money presently earned for work in progress;
  • Less the total amount of all debts owed by the business.
Post-Departure Appraisal

The value of the partnership shall be determined by an independent appraisal conducted by an appraiser chosen, if possible, by unanimous vote. If all partners cannot agree on an appraiser, the departing partner and the remaining partners shall each select an independent appraiser. If the two selected appraisers are unable to agree on the fair market value of the partnership business, then the two appraisers shall mutually select a third appraiser to determine the fair market value. The partnership and the departing partner shall share the cost of the appraisal equally.

Capitalization of Earnings

The value of the partnership shall be determined as follows:

  • The average yearly earnings of the business shall be calculated for the preceding 
  • "Earnings," as used in this clause, is defined as:  
    Alternate Selection
    Label Contract Text
    gross gross earnings
    net net profits
  • The average yearly earnings shall then be multiplied by a multiple of  to give the value of the business, except as otherwise provided for in this clause.
Multiple Selection
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Other Capitalization Factors
  • Additional factors: .
Hybrid Valuation

Timing of Payments to Departing Partner   

Alternate Selection
Label Contract Text
Equal Monthly Payments

Whenever the partnership is obligated or chooses to purchase a partner's interest in the partnership, it shall pay for that interest by promissory note of the partnership. Any promissory note shall be dated as of the effective date of the purchase, shall mature in not more than years, and shall be payable in equal installments that come due monthly. The first payment shall be made  days after the date of the promissory note. 

Multiple Selection
Label Contract Text
with interest The monthly payments shall bear interest at the rate of  percent per annum.
Lump Sum and Monthly Payments

Whenever the partnership is obligated to, or chooses to, purchase a partner's interest in the partnership, it shall pay for that interest as follows:

First: It shall pay the departing partner  per cent of the payment for the partnership interest within  days of determining the partnership valuation.

Second: After that initial payment, it shall pay the balance owed by promissory note of the partnership. Any promissory note shall be dated as of the effective date of the purchase, shall mature in not more than  years, shall be payable in equal installments that come due monthly, and may, at the partnership's option, be subordinated to existing and future debts to banks and other institutional lenders for money borrowed. The first payment shall be made  days after the date of the promissory note.

Multiple Selection
Label Contract Text
with interest The monthly payments shall bear interest at the rate of percent per annum.
Cash Payment

Whenever the partnership is obligated or chooses to purchase a partner's interest in the partnership, it shall pay for that interest in cash within days of determining the partnership valuation.

Continuity of Partnership Business

From the date of any of the following events, a partner shall be considered as a seller to the partnership of his or her interest in the partnership as set forth in this Agreement.  If a partner is expelled for one of the reasons, below, the partnership shall not be dissolved, but shall continue to function without interruption.

Upon Partner's Withdrawal. In the case of a partner's death, permanent disability, retirement, voluntary withdrawal, expulsion from the partnership, or death, the partnership shall not dissolve or terminate, but its business shall continue without interruption and without any break in continuity. On the disability, retirement, withdrawal, expulsion, or death of any partner, the others shall not liquidate or wind up the affairs of the partnership, but shall continue to conduct a partnership under the terms of this Agreement.

Partnership Continues Upon Bankruptcy of Partner. Notwithstanding any other provision of this Agreement, a partner shall cease to be a partner and shall have no interest in common with the remaining partners or in partnership property when the partner does any of the following:

  • Obtains or becomes subject to an order of relief under the Bankruptcy Code
  • Obtains or becomes subject to an order or decree of insolvency under state law
  • Makes an assignment for the benefit of creditors
  • Consents to or accepts the appointment of a receiver or trustee to any substantial part of his or her assets that is not vacated within 90 days
  • Consents to or accepts an attachment or execution of any substantial part of his or her assets that is not released within 90 days.
Multiple Selection
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Control of Trade Name and Trademarks

Partnership Continues to Own Name.  The partnership trade name and trademarks and service marks are owned by the partnership. Should any partner cease to be a member of the partnership, the partnership shall continue to retain exclusive ownership and exclusive right to use the partnership trade name and trademarks and service marks.

Termination of Partnership

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Assets divided according to agreement

The partnership may be dissolved at any time by agreement of all the partners, in which event the partners shall proceed with reasonable promptness to liquidate the business of the partnership. The assets of the partnership business shall be used and distributed to pay or provide for the payment of all partnership liabilities and liquidating expenses and obligations. Thereafter, the remaining assets of the partnership shall be divided proportionately among the partners in accordance with their ownership interest in the partnership as set forth in this Agreement.

Assets divided according to this provision

The partnership may be dissolved at any time by agreement of all the partners, in which event the partners shall proceed with reasonable promptness to liquidate the business of the partnership. The assets of the partnership business shall be used and distributed to pay or provide for the payment of all partnership liabilities and liquidating expenses and obligations. Thereafter, the remaining assets of the partnership shall be divided proportionately among the partners as follows:

Unchangeable Alternate Selection
Label Contract Text
two
  • %
  • %
three
  • %
  • %
  • %
four
  • %
  • %
  • %
  • %
five
  • %
  • %
  • %
  • %
  • %
six
  • %
  • %
  • %
  • %
  • %
  • %

Multiple Selection
  Contract Text
private dispute resolution

Disputes

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Label Contract Text
mediation only

Mediation. If a dispute arises under or relating to this Agreement, the parties will try in good faith to settle it through mediation conducted by a mediator to be mutually selected. The parties will share the costs of the mediator equally. Each party will cooperate fully and fairly with the mediator and will attempt to reach a mutually satisfactory compromise to the dispute. If the dispute is not resolved within 30 days after it is referred to the mediator, either party may take the matter to court.

mediation to arbitration (no litigation)

Mediation and Arbitration. If a dispute arises under or relating to this Agreement, the parties will try in good faith to settle it through mediation conducted by a mediator to be mutually selected. The parties will share the costs of the mediator equally. Each party will cooperate fully and fairly with the mediator and will attempt to reach a mutually satisfactory compromise to the dispute. If the dispute is not resolved within 30 days after it is referred to the mediator, it will be settled by binding arbitration by an arbitrator to be mutually selected. Judgment on the arbitration award may be entered in any court that has jurisdiction over the matter.
arbitration (no litigation)

Arbitration. All claims and disputes arising under or relating to this Agreement are to be settled by binding arbitration by an arbitrator to be mutually selected. Judgment on the arbitration award may be entered in any court that has jurisdiction over the matter. 

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additional provisions

Additional Provisions

Additional provisions are as follows:

Entire Agreement 

This is the entire agreement between the partners. It replaces and supersedes any and all oral agreements between the partners, as well as any prior writings. This Agreement may not be amended except in a writing as provided for in this Agreement.

Successors 

This agreement binds and benefits the respective successors, inheritors, assigns, and personal representatives of the partners, except to the extent of any contrary provision in the Agreement.

Waiver 

The failure to exercise any right provided in this Agreement shall not be a waiver of prior or subsequent rights.

Governing Law 

This Agreement will be governed by and construed in accordance with the laws of the state of .

Severability 

If any court determines that any provision of this Agreement is invalid or unenforceable, any invalidity or unenforceability will affect only that provision and will not make any other provision of this agreement invalid or unenforceable and shall be modified, amended, or limited only to the extent necessary to render it valid and enforceable.

Keep Together

Attached Papers 

Any attached sheet or document shall be regarded as fully contained in this Agreement.

MY SIGNATURE BELOW INDICATES THAT I HAVE READ AND UNDERSTOOD THIS AGREEMENT.

Unchangeable Alternate Selection
Label Contract Text
two

Signature: ____________________________________________         Date: _______________            

Signature: ____________________________________________         Date: _______________     

three

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

four

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

five

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

six

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

Signature: ____________________________________________         Date: _______________     

 

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