What is a Partnership Agreement?

Partnership Agreement

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Partnership Agreement

A partnership agreement is a legal document that sets out the terms and conditions of a partnership between two or more individuals who are going into business together. This agreement outlines the rights, responsibilities, and obligations of each partner and sets the rules for how the partnership will be managed and operated.

Here are some of the key elements that a partnership agreement typically covers:

  • Name and Purpose of the Partnership: This section describes the name under which the business will operate and the nature of the business.
  • Capital Contributions: The agreement should specify how much capital each partner is contributing to the partnership.
  • Profit and Loss Distribution : It should be defined how profits and losses will be divided among the partners.
  • Management and Decision-Making: The agreement should outline how decisions will be made, what types of decisions require unanimous consent, and the duties and responsibilities of each partner.
  • Dispute Resolution: The agreement may include provisions for resolving disputes among partners, such as mediation or arbitration.
  • Withdrawal or Addition of Partners: The terms for adding new partners or handling the withdrawal or death of a partner should be included.
  • Dissolution of the Partnership: The agreement should set out the conditions under which the partnership may be dissolved and the process for winding up the partnership’s affairs.
  • Non-Compete Clauses: The partners might agree to restrictions on their ability to compete with the partnership business during and/or after the partnership ends.

A well-drafted partnership agreement is crucial to ensure that all partners have a clear understanding of their rights and responsibilities, the financial implications, and what happens in various potential scenarios. It is strongly recommended that partners consult with a lawyer when creating a partnership agreement to ensure all legal aspects are properly addressed.

Example of a Partnership Agreement

Here’s an example of what elements might be included in a simplified partnership agreement for a hypothetical digital marketing agency formed by two partners, Anna and Bella:


1. Name and Business: The parties hereby form a partnership under the name “AB Digital Marketing” to conduct a digital marketing business.

2. Place of Business: The principal place of business shall be 123 Main Street, New York City, NY, or such other places as the partners may from time to time designate.

3. Term: The partnership shall commence on July 1, 2023, and shall continue until dissolved as hereinafter provided.

4. Capital Contributions: Anna and Bella have each contributed $50,000 for a total capital of $100,000 in the partnership.

5. Profit and Loss Distribution: Profits and losses shall be shared equally between the partners, unless they agree otherwise in writing.

6. Management and Decision Making: Both partners shall participate equally in the management and control of the business. Major decisions such as adding new partners, significant financial borrowing, or other major business decisions will require consent of both partners.

7. Withdrawal or Addition of Partners: The addition of new partners will require the unanimous consent of the existing partners. Partners may withdraw from the partnership with a written notice of 60 days.

8. Dissolution: The partnership may be dissolved by the mutual agreement of the partners or by the withdrawal, death, or incapacity of a partner.

9. Dispute Resolution: Any disputes relating to the interpretation of this agreement or the rights of the partners shall be submitted to mediation or, if necessary, legally binding arbitration.

This is a simplified example and actual partnership agreements can be quite complex, often including more specific provisions. It is advisable to engage the services of a qualified attorney to assist in drafting a partnership agreement to ensure all necessary elements are included and the interests of all partners are adequately protected.

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