A partnership agreement template is a legal document created to bind two or more individuals/businesses in a business venture. This agreement includes important information on the nature of a business. With the help of this document, the involved parties understand how the company is managed and financed.
Table of Contents
Who will need a partnership agreement?
A partnership agreement provides benefits to any start-up or pre-established business which is operating without a written record. This legal document helps the owners of the business to formalize properly many of the entity’s most important functions. Moreover, this document prevents disagreement over ownership stake percentages. The partnership agreement defines the rights of each owner clearly and lets them know how business decisions should be made.
Different types of partnership agreements:
Consider what type of business you are going to set up before writing a partnership agreement. Let us discuss the different types of partnership agreements;
Limited partnership agreement
This type of limited partnership agreement provides protection to one or more partners from debt liability. In a limited partnership agreement, a general partner is more responsible for any debts accrued by the company while the other party just invests their capital at risk.
General partnership agreement
A general partnership agreement is the most common partnership agreement where most partnerships fall. Generally, it is an agreement made between one or more business owners for a company that isn’t registered as a corporation or LLC.
50-50 partnership agreement
A 50/50 partnership agreement is an agreement created between two parties that specifies how profits, decision-making, and responsibilities will be shared between them.
Small business partnership agreement
Smaller entities use this agreement to make sure that the key details of their business are defined properly. This agreement binds them without registering officially with their state.
What to include in a partnership agreement?
A partnership agreement must include the following details;
Details of the owners
Provide the names and contact details of the main owners in your partnership agreement.
Business Information
Write the business details which tell the readers about the following;
- Its registered name and address
- What the company does
- When the partnership was built
- In the future, whether or not it will dissolve on a set date
Ownership rights and percentages
The partnership agreement must specify the amount that has been invested by each party. Also, specify how business ownership is to be shared.
The partnership’s goals description
Every successful company has well-defined goals that align with the objectives of the owners. Here, you have to specify the following details;
- How much revenue do you want to make
- The number of employees you want to hire
- The results you want to obtain
Profit and debt distribution
Describe in the agreement how profits and losses will be shared among the partners. This distribution will be based on a percentile scale and how much of the company each party has.
Tax status
The agreement must specify who will manage the company’s taxes.
Adding or removing partners
In the agreement, describe on what basis someone will add or remove from the business officially. Having a plan ahead is important in case someone leaves or a new one joins.
Voting rights for partners
State in the partnership agreement clearly how voting rights will be shared among all the partners. Also, write the proportion of a vote which is required to proceed with an action.
Sample Partnership Agreement Template
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General Partnership Agreement Template
Free Partnership Agreement Form
General Partnership Agreement of a Business Owned By Individuals
FAQ’s:
The involved parties must understand what they are agreeing to before writing and signing a partnership agreement. All the owners should sit together to negotiate how the business will be organized.
These are as follows;
1- Capital contributions
2- Duties as partners
3- Sharing of profits and losses
4- Acceptance of liabilities
5- Dispute resolution
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