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  • Curington Law, LLC

Key Terms to Include in a Partnership Agreement

When starting a business with another individual, it’s essential to have a partnership agreement in place. This legal document outlines the rights and responsibilities of each partner, as well as the terms and conditions of the partnership. Here are some key terms that every partnership agreement should include:


1. Capital Contributions


Partnerships require investment from each partner to fund the business. The partnership agreement should outline how much each partner is expected to contribute and when those contributions are due. It's also important to specify what happens if one partner fails to make their contribution.


2. Profit Sharing


Partnerships are generally structured as either general partnerships or limited partnerships. General partners share equally in the profits and losses of the business, while limited partners have less control over the business but also have limited liability. The partnership agreement must detail how profits and losses will be shared among the partners.


3. Decision Making


Partnerships involve shared decision-making between the partners. The partnership agreement should outline how decisions will be made, such as through unanimous agreement or by a majority vote. It's also important to specify what happens if there is a deadlock in decision making.


4. Roles and Responsibilities


Partners typically have different roles and responsibilities within the business. The partnership agreement should define these roles and responsibilities, along with any limitations on the authority of each partner. This helps avoid confusion and conflict down the line.


5. Dissolution and Termination


In the event that the partnership ends, the partnership agreement should outline the process for dissolution. This includes how assets and liabilities will be divided among the partners, as well as any obligations that continue after the partnership ends.


While this list is not exhaustive, including these terms in your partnership agreement will help ensure that all parties are clear on their obligations and responsibilities. It's important to consult with a legal professional when drafting a partnership agreement to ensure that all necessary terms are included and the agreement complies with relevant laws and regulations.


If you're a lawyer or business owner with questions about partnership agreements, reach out to our firm for legal advice and guidance at 312 766-6671 or online.

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