partnership agreement in a business plan

Starting a Business | Ultimate Guide

How to Create a Business Partnership Agreement [+ Free Template]

Published August 15, 2018

Published Aug 15, 2018

WRITTEN BY: Kiah Treece

This article is part of a larger series on Starting a Business .

A business partnership agreement is a contract between partners that contains terms like the business’s purpose, partner contributions and voting rights. A partnership agreement isn’t required to form a general partnership and doesn’t have to be filed with your state. However, have your partners sign one to create a legally enforceable document for resolving disputes.

Business Partnership Agreement Templates

Free general partnership agreement template.

We recommend hiring an attorney or online legal service, such as Rocket Lawyer , to prepare important legal documents for your partnership. However, if you’re comfortable drafting your own agreement and want to save on legal fees, download our free general partnership agreement template and follow the steps below to draft a simple partnership agreement for your business.

Get your free business partnership agreement template here:

• Free General Partnership Agreement Template (Google doc)
• Free General Partnership Agreement Template (.docx)
• Free General Partnership Agreement Template (PDF)

State-specific Business Partnership Agreement Template

The 11 steps to draft a business partnership agreement include:

Articles I-V: Organize Basic Partnership Details

Provide basic details about your business at the beginning of your partnership agreement. Articles I through V of your partnership agreement should include your partnership’s name, location, purpose and term. General partnerships don’t have to file this information with the state but include it in a signed partnership agreement to keep on file with your business.

As a lead-in to Articles I through V, provide the names and addresses of your partners in the first paragraph of your partnership agreement. This information lets the public know that you and your partners are all engaged in business activities together as you fill out the articles together.

Screenshot of partnership agreement introductory information

Follow these steps to draft Articles I through V of your partnership agreement:

Identify Your Partnership State

Your partnership state is the state in which you’ll conduct business. The state you select determines the availability of a fictitious name for your partnership and determines the taxes and laws that will apply to your business. This information will be included in the title of your partnership agreement, in Article I and in various places throughout your agreement.

Name Your Partnership

A partnership can be named after its partners or operate under a fictitious business name. If you choose a fictitious name, confirm it isn’t already in use and fill out a fictitious business name statement to give notice that your partners are operating under the name. Once finalized, include the name in Article II of your partnership agreement.

Screenshot of partnership agreement Article I – Formation

If you wish to operate under the name of your partners, list each partner’s last name. However, if you want to operate under a fictitious business name, choose one that describes your business without limiting your geographic area or products. For example, instead of “Northwest Ohio Fishing Lures,” choose a name like “Midwest Outdoor & Fishing.”

Screenshot of partnership agreement Article II – Partnership Name

If you need some help choosing a business name, check out our business name generator .

Identify a Broad Purpose

States don’t require general partnerships to have a partnership agreement, so your purpose statement doesn’t have to meet any state-specific requirements. However, it should describe the nature of your business and be broad enough to allow for future business growth. Include a general purpose statement in Article III that allows your partnership to evolve without revising the agreement every time your business changes.

For example, stating that the purpose of the partnership is to own and develop real property and do all other lawful things as may be necessary to carry on the partnership is general enough to encompass a variety of real estate services and allows for growth. Similarly, if your purpose is conducting the general business of operating a commercial farm and “such other businesses and purposes as the partners may from time to time determine,” you leave your partnership room to evolve.

Screenshot of partnership agreement Article III – Partnership Purpose

Define Your Partnership Term

The partnership term is the amount of time the partnership relationship will exist. This period begins when the partnership is formed and can end at any time. Include a starting date and describe when the partnership may end in Article IV of your business partnership agreement.

For example, if the partnership was created to handle a single task or project, provide a specific termination date for the partnership. Otherwise, state generally that the partnership will exist until the partners mutually agree to dissolve it, until the death of a partner or until any other circumstance agreed upon by the partners.

Screenshot of partnership agreement Article IV – Partnership Term

Locate Your Principal Place of Business

Your principal place of business is the address where you’ll perform the partnership’s business activities. This should be a street address and not a P.O. Box. Use Article V to set forth your place of business at the time the agreement is executed but allow partners to change the address as necessary during the partnership.

For example, if you have a retail store, your principal place of business will be the address of the brick-and-mortar store. In contrast, if you have an e-commerce website, your principal place of business is the address from which your partners and employees are running the website.

Screenshot of partnership agreement Article V – Place of Business

Our template is a great place to start if your partnership is already formed or if this isn’t your first business. However, if you need extra guidance while you set up your business, let Rocket Lawyer help you compile the necessary information to get your partnership up and running. A Rocket Lawyer membership plan is $39.99 per month and its On Call attorneys can guide you through the process of creating your partnership.

Visit Rocket Lawyer

2. Article VI: List & Describe Each Partner’s Contribution

A partner’s capital contributions are cash investments, physical property, and other assets like intellectual property they commit to business operations at the outset of the partnership. Capital contributions establish each partner’s equity in the business. List and describe partner contributions in Article VI of the partnership agreement to establish a record of each partner’s capital account.

Capital contributions of partners can include:

• Cash : This is the most common type of contribution to partnerships and many of your partners will likely contribute cash as their initial capital contribution; denote this value in Article VI of the partnership agreement and specify whether it is earmarked for specific partnership expenses
• Personal property : Personal property contributions include things like equipment or furniture; for example, if you start a restaurant one of your partners may contribute kitchen equipment or furniture for the seating area. Include the value of this property in your partnership agreement
• Real estate : If your partnership will have a brick-and-mortar office or storefront, one of your partners may contribute real estate; include the appraised value, address and other identifying information for this property in the partnership agreement
• Client lists : In addition to industry knowledge, some partners also use their client lists as a capital contribution; it can be difficult to assign a monetary value to this kind of property so don’t undervalue this contribution when assigning ownership interests; you may encounter this kind of contribution if you have a real estate partnership or other business that relies heavily on sales
• Intellectual property : Depending on the type of business, a partner might contribute intellectual property like software code; if possible, estimate the value of the contribution based on similar intellectual property or its operational value to the partnership; this is not a common form of partnership contribution but may arise in a tech startup or software partnership

Screenshot of partnership agreement Article VI – Capital Contributions

About half of businesses with employees don’t survive past five years. One of the major causes of a business failing is undercapitalization — partners underestimate how much money they’ll need and how successful they’ll be early in business. Describing the contributions of each partner carefully in Article VI of your partnership agreement will help you better understand your business’ resources.

3. Article VII: Determine Ownership Interests

Business ownership can be shared between partners in a way agreed upon by the partners. Often, ownership reflects the size of a partner’s contribution. However, ownership is more complicated if partner contributions aren’t easily valued or where partner roles and responsibilities aren’t equal. Use your partnership agreement to describe how your business ownership will be divided.

Equal ownership isn’t appropriate where partners contribute things unevenly like:

• Property or cash : If one partner contributed a significantly larger amount of property or cash to the business, their greater risk should merit a greater ownership and returns
• Ideas : If one partner thought of the original business concept or otherwise completed the first steps toward creating the partnership, their ownership should be greater than their cash contributions
• Time : Conflicts can arise where one partner is working full-time and the other partners are working part-time; make sure this imbalance is reflected in that’s partner’s ownership
• Capital raises : Although venture capital raised by a partner is not a direct cash contribution, it should be recognized as part of his or her ownership interest

Screenshot of partnership agreement Article VII – Interest

If you don’t include partner contributions and ownership interests in your partnership agreement, you should list them elsewhere in your partnership’s records and provide them to each partner. An attorney can help identify partner contributions and determine the best ownership structure for your partnership. However, if your partnership contributions only include cash or other easily valued assets, use our template to draft a simple partnership agreement for free.

4. Article VIII: Determine Profit & Loss Distribution

Partners do not receive a salary for their role in a partnership. Instead, profits and losses are typically distributed among the partners in accordance with their ownership interests. Include details about how your business’s profits and losses will be distributed among members in Article VIII of your partnership agreement to avoid financial disputes between partners.

Generally, a partnership’s profits and losses are distributed among partners based on each partner’s ownership percentage. If you choose this method, indicate in your partnership agreement that the partners must share in profits and losses in the same proportion as their ownership or capital contributions.

When drafting Article VIII, address these issues regarding profits and losses:

• Division : Decide how you’ll divide profits and losses among owners; for example, it’s common to divide profits and losses based on each partner’s ownership percentage and/or relative capital contribution
• Calculation : Identify how distributions will be calculated; for example, you may calculate distributions based on a percentage of annual profits
• Timing : Indicate when you plan to distribute profits to the partners; this can be monthly, quarterly, annually and so on
• Reinvestment of profits : Have the partners determine whether a portion of the profits will be reinvested into the business each month or year

Screenshot of partnership agreement Article VIII – Profit and Loss

5. Article IX: Establish Voting Procedures

A partnership’s voting procedures detail the way partners must vote to make decisions for the partnership. Article IX of your partnership agreement should specifically mention whether there must be a unanimous or majority vote. This section should also describe how much weight each partner’s vote will have.

For example, Article IX of your partnership agreement can require that decisions of the partnership be determined by a majority vote with votes cast in the same percentage as capital contributions. Alternatively, you can require a unanimous vote of the partners, give each member’s vote equal weight regardless of their contribution or ownership percentage.

Screenshot of partnership agreement Article IX – Voting

6. Article X: Describe Accounting Requirements

Keep an accurate accounting of your partnership’s day-to-day business to maintain a comprehensive understanding of business financials and meet tax requirements. Use Article X of your partnership agreement to describe where the partnership’s books should be kept, when partners should have access to the books and how to report transactions to the partnership.

This section should first state where the partnership’s books should be stored — usually at the principal place of business. Article X should also state that the accounting records should be available to all of the partners to inspect at any time. Finally, assert that partners have to report all partnership transactions accurately and as soon after the transaction as possible.

Screenshot of partnership agreement Article X – Accounting

7. Article XI: Prepare for New Partners

Businesses change and sometimes this includes adding partners. Because partnerships are structured around the partners, the addition of a partner changes the ownership structure of the business. Even if you don’t anticipate changes to your business, include procedures for adding new partners in Article XI of your agreement.

Important information regarding new partners to incorporate into Article XI includes who has the power to add new partners, how to adjust partner responsibilities and how voting will be impacted. If you want the flexibility to add partners later on, allow the agreement to be amended to include new partners pending a unanimous vote of all partners.

Screenshot of partnership agreement Article XI – New Partners

8. Article XII: Define the Partnership’s Management & Authority

Your partnership agreement should also describe your management structure and authority of partners to make business decisions. Describe how day-to-day partnership affairs will be managed and identify partner responsibilities and authority to borrow on credit, transfer assets and so on. Include this information in Article XII of your partnership agreement to avoid disputes regarding partners management and authority.

It is important to establish what kind of authority partners have to make decisions on behalf of the business at the outset. Describe the powers of partners to manage business activities at the beginning of Article XII. This prevents a partnership from being responsible for the unauthorized actions of its members and ensures that creditors and other third parties understand the authorities of each member to enter into contracts, borrow credit and transfer assets.

The day-to-day affairs of partnerships can be managed by a management committee made up of several partners. To form a committee, include terms in your partnership agreement describing how many partners should be on the committee, how they will be selected, and the scope of the committee’s authority. For example, you may choose to have three partners on the committee, chosen by a majority vote of the partners and who have authority to operate all partnership business.

Screenshot of partnership agreement Article XII – Management & Authority

Types of commitments the partnership agreement should address include:

• Partnership contracts : Generally, a partner with authority to sign contracts on behalf of the partnership can sign a contract that binds all of the partners. Make sure you limit contract authority to partners with knowledge of the businesses needs.
• Partnership debt : If your business will have a credit card, loan, line of credit or other debts, make sure you specify who may sign for new debts in your partnership agreement. Depending on the business structure that you choose, each partner may be personally liable for any unpaid business debt.
• Partnership expenditures : If you want to limit expenditures made by partners on behalf of the business, limit who may make purchases without consulting other partners. Alternatively, establish a spending limit on purchases made without permission from other partners.

Use Article XII of the partnership agreement to delineate each partner’s authority to sign contracts, open accounts and otherwise commit the partnership to avoid financial and contractual obligations that are not in the best interest of the partnership. For example, limit the amount of money a partner may spend for the business to $50,000 or less to make sure partners aren’t spending large sums of partnership assets on things the partnership doesn’t want or need.

9. Article XIII: Plan for Termination

If there is a partnership agreement in place, a partnership can terminate whenever the partners desire. Use Article XIII of your agreement to specify how your partnership can terminate and describe how partners and partnership assets should be treated upon termination. Include details about whether the business should survive after a partner exits voluntarily or otherwise.

In the absence of a partnership agreement, termination of a partnership occurs pursuant to state default rules. Under default rules, a partnership will terminate upon the death or bankruptcy of a partner or under other state-specific circumstances. Control how and when your partnership will terminate by explicitly listing termination events in your partnership agreement.

Screenshot of partnership agreement Article XIII – Termination

10. Article XIV: Decide How to Resolve Partner Disputes

Disputes are an inevitable part of owning a small business. Conflicts between partners are especially dangerous because, left unresolved, they can cause your business to implode from within. Protect your business from by including language in the partnership agreement describing how and where disputes should be resolved between partners.

One way to handle partnership disputes is requiring alternative dispute resolution (ADR). ADR uses a third party to reach an agreement between partners without litigation and includes practices like mediation and arbitration. Include terms requiring ADR in your partnership agreement to resolve disputes without the cost, hassle and public exposure that comes with litigation.

Other options for dispute resolution include giving the business’ CEO the final say, voting based on ownership percentages, requiring a majority vote for businesses with an odd number of partners or giving a particular partner final say on discrete areas of the business. If you prefer to handle disputes in-house without the help of an ADR specialist, include language in your partnership agreement describing your preferred dispute resolution procedures.

Screenshot of partnership agreement Article XIV – Dispute Resolution

11. Execute, File & Provide Copy to Partners

Partnership agreement filing requirements depend on your business and your secretary of state’s office. Familiarize yourself with your state’s requirements to determine whether a formal filing is necessary for your partnership. Either way, make sure the partnership agreement is signed by every partner and that each partner receives a copy of the document for their records.

Screenshot of partnership agreement signature page

Other Things to Include in a Business Partnership Agreement

Depending on your partnership and business structure, you may need to include additional terms after Articles I through XIV of your partnership agreement. For example, describe partner responsibilities, how to handle new partners or what to expect during a partnership sale. If you have a complex partnership or anticipate changes to your business, include additional terms in your agreement.

Other things you may want to include in your partnership agreement are:

Partner Responsibilities & Commitments

Generally, partners are involved in different departments of the business. To facilitate efficient organization of partnership roles and responsibilities, list expectations in the partnership agreement. If you want to establish work hours, vacation time allowances or a partner’s ability to work outside of the business, include these details in the partnership agreement as well.

Selling the Business

Selling a business can be one of the most difficult tasks partners face. Because the sale of a partnership is likely to cause disputes between partners, it’s important to establish transfer procedures. Use your partnership agreement to specify who’ll manage purchase offers, whether partners can force the sale of the business and the minimum business sale price.

How a Business Partnership Agreement Works

A partnership agreement is a legal document that formalizes business operations and creates a contract between partners. General partnership agreements also protect businesses from internal disputes, establish partner responsibilities and more. Your general partnership doesn’t have to file its agreement but keep a signed copy on file in case disputes arise.

The three types of partnerships include:

• General partnership : A general partnership is the most basic form of partnership and does not require state filings or other formalities like annual meetings or ongoing state fees. Instead, a general partnership is formed each time partners come together to engage in business activities. This article and free template focus on what you should include in a general partnership agreement.
• Limited partnership : Limited partnerships (LPs) are typically reserved for finite projects like estate planning. This structure requires filing documents with the state and offers liability protection for its limited partners only. General partners, who oversee day-to-day business activities, have unlimited liability for the acts and debts of the LP.
• Limited liability partnership : Limited liability partnerships (LLPs) are more complex and can only be formed by certain types of professional businesses that require licensing under state law, like doctors, architects and attorneys. LLPs don’t protect partners from their own malpractice but a partner’s personal assets can’t be used to satisfy the debts of the LLP.

Because partnerships are complex legal entities, we recommend hiring an attorney or using an online legal service to help choose a business structure and file it with the state. If you don’t want to spend money to hire an attorney, download our partnership agreement template to get started with a simple partnership agreement today.

Who a Business Partnership Agreement is Right For

Partnership agreements are legally binding contracts between business partners. Although not required by state law, even a simple partnership agreement will formalize your partnership’s management structure and protect it from internal disputes. If you have a partnership or an LLP, hire an attorney or use our free template to execute a partnership agreement.

Benefits of a Business Partnership Agreement

Having an enforceable partnership agreement for your business has several benefits. If drafted correctly and signed by all of the partners, a partnership agreement can protect your business from internal disputes and prepare partners for difficult management decisions. Familiarize yourself with the benefits of an enforceable partnership agreement before you start drafting one for your business.

The benefits of having a partnership agreement include:

Avoid State Default Rules

States impose default rules on partnerships that don’t have a partnership agreement on file. Under default rules, partnerships terminate under certain circumstances and internal disputes must be resolved using default procedures. Avoid default outcomes by drafting a business partnership agreement describing how profits will be distributed, how the partnership may be terminated and other important procedures.

Prevent & Resolve Disputes

Among other important terms, business partnership agreements describe how partners must vote and who has authority to make decisions for the business. Partnership agreements also include resolution procedures in the event of a conflict between partners. Have dispute avoidance and resolution terms in place to protect your business from failing due to the disagreements between partners.

Clarify Business Structure

Drafting a business partnership agreement will help you and your partners outline how the business will be structured. By detailing the responsibilities and authority of each partner, a partnership agreement provides clarity and allows the partnership to be operated more efficiently. Include partner responsibilities and expectations within the partnership agreement to lend structure to your business.

Facilitate Business Transition

Drawbacks of a business partnership agreement.

A business partnership agreement can protect your business from internal disputes and other management issues. However, hiring an attorney to draft your agreement can be expensive. A partnership agreement may also restrict partner authority and delay decisions. Use our free partnership agreement template and choose broad language that doesn’t limit your partners’ authority more than necessary.

The drawbacks of a business partnership agreement include:

Costly to Draft

Having an attorney draft legal documents for your business can get expensive. Use our free template to create a simple partnership agreement for your business.

Restrictive Language

Formalizing your management responsibilities, voting structure, profit distribution and other elements of your partnership can restrict how partners behave. Although this is generally an advantage of having a partnership agreement, it can reduce flexibility in business operations by limiting partner authority and slowing down the decision-making process.

The Bottom Line

General partnerships are formed when two or more partners agree to enter into business together. A formal filing isn’t required to create a simple partnership but you should execute a partnership agreement that formalizes the business structure. Include terms like partner contributions, dispute resolution methods and profit sharing in your agreement to protect you and your business.

About the Author

Find Kiah On LinkedIn

Kiah Treece

Kiah Treece is a staff writer at Fit Small Business specializing in real estate. Before joining the team here, she worked as an environmental scientist and attorney specializing in real estate development. She also researched climate change for The Climate Group . Kiah earned her MS from the University of Florida and a law degree from the University of Toledo . During law school, she served as an editor of the Law Review and edited manuscripts for faculty and students.

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Business Partnership Agreement Writing Guide

Table of Contents

Since joining Business News Daily in 2015, Adam Uzialko has become a trusted resource for small businesses. As our Small Business Insider and an entrepreneur, he has spent thousands of hours researching and writing about the software and services entrepreneurs need most.

A business partnership agreement is a document that establishes clear business operation rules and delineates each partner’s role. These agreements are enacted to resolve disputes, delineate responsibilities, and define how to allocate profits and losses . 

Any business partnership in which two or more people own a stake in the company should have a business partnership agreement. This legal document provides critical guidance in a company’s operations.

We’ll explore what a business partnership should include, as well as share resources and best practices for creating this critical legal document.

What is a business partnership agreement?

A business partnership agreement is a legal document between two or more business partners that spells out the business’s legal structure and purpose. It outlines the following information: 

• Individual partners’ responsibilities
• Capital contributions
• Partnership property
• Each partner’s ownership interest
• Decision-making conventions 

The agreement also outlines what steps will be taken if one business partner decides to sell their interest or leave the company and how the remaining partner or partners would split profits and losses.

“I highly suggest formal partnership agreements are put in place as businesses evolve from solo practices into a partnership or ensembles,” said Rich Whitworth, former head of business consulting for Cetera Financial Group. “The biggest reason is that it establishes the ‘rules of engagement’ between the business and its owners … and lays out a road map on how to deal with entity-level issues.”

While businesses seldom begin with concerns about a future partnership dispute or how to dissolve the business, business partnership agreements are essential in situations in which emotions might otherwise take over. A written, legally binding agreement is an enforceable document instead of a spoken agreement between partners.

If you have an LLC , you’ll need articles of incorporation and an operating agreement to outline a business’s relationship with the state and the relationship between business owners.

How to write a business partnership agreement

A business partnership agreement must include all foreseeable issues regarding the business’s co-management. The easiest way to prepare a business partnership agreement is to hire an attorney or to find a customizable template. If you’re writing your own agreement, find a template for a company that’s similar to the business you’re starting .

A business partnership agreement should follow a logical process and include the following information:

• Business generalities. Start by stating the business’s name , its legal structure and the business’s location (i.e., which state’s laws will govern it).
• Business operations. State the partnership’s purpose, and explain the activities the business will and will not engage in.
• Ownership stake. Spell out the percentage of the business that each partner owns. Enumerate each partner’s rights and responsibilities.
• Decision-making process. Outline how decisions are made and the responsibility of each partner in the decision-making process . Include who has financial control of the company and who must approve the addition of new partners. Also include information on how profits and losses are distributed among the partners.
• Liability. If the business partnership is set up as an LLC, the agreement should limit the liability each partner faces in the event of a business lawsuit . To do so effectively, a partnership agreement should be paired with other documents, such as articles of incorporation . A business partnership agreement alone is likely not enough to fully protect the partners from liability.
• Dispute resolution. Any business partnership agreement should include a dispute-resolution process. Even if you’re working with family or best friends, disagreements are common in business.
• Business dissolution. If one or more partners choose to dissolve the business, a business partnership agreement should outline how that dissolution will occur. It should spell out the procedures for partners to join or leave the partnership. It should also outline continuity or succession planning for partners leaving the business.
• Explain how the partnership’s finances (including small business taxes ) will be managed.

Once you’ve spelled out everything in detail, each partner must sign the agreement for it to take effect. 

To ensure your business partnership agreement adequately covers all business liabilities , closely involve your legal counsel while developing and reviewing the agreement, even if you’re working from a template.

The stages of a business partnership agreement

A business partnership agreement doesn’t have to be set in stone, especially as a business grows and develops. You’ll be able to add to the agreement, especially if unforeseen circumstances occur. According to Whitworth, there are four primary stages to consider.

• Initial partnership: This stage involves creating the initial business partnership agreement as described above. You’ll draft an agreement that governs the business’s general operations, decision-making process, ownership stakes and management responsibilities.
• Addition of limited partners: As a business grows, it might have the opportunity to add new partners. According to Whitworth, the original partners might agree to a “small carve-out of minor equity ownership” for the new partner, as well as limited voting rights that give the new partner partial influence over business decisions.
• Addition of full partners: Sometimes you’ll want to promote a limited partner to a full business partnership. A business partnership agreement should include the requirements and process for elevating a limited partner to full partner status, complete with full voting rights and influence equal to that of the original partners.
• Continuity and succession: At some point, founders may retire or leave the company without wanting to dissolve it. If you didn’t include continuity and succession planning initially, it’s crucial to outline your plan. Describe how ownership stake and responsibilities will be distributed among the remaining partners after the departing partners take their leave.

“Partnership agreements need to be well crafted for myriad reasons,” said Laurie Tannous, owner of law firm Tannous & Associates Inc. “One main driver is that the desires and expectations of partners change and vary over time. A well-written partnership agreement can manage these expectations and give each partner a clear map or blueprint of what the future holds.”  

Succession planning is crucial to ensuring a business’s survival when a founder dies or an owner leaves the company.

Free business partnership agreement templates

Business partnership agreement templates are available for free online. These resources can help you draft your agreement, but you should have legal counsel review your draft and help you revise and finalize the document before you sign it. 

Once a lawyer confirms that your business partnership agreement is thorough and legally binding, you and your partners can sign it to make it official.

When you’re searching for business partnership agreement templates, start with the following resources: 

• LegalTemplates.net
• LegalContracts.com
• TemplateLab

Business partnership agreement mistakes to avoid 

Partnership agreements are complex documents. Unfortunately, many people get bogged down in details and make crucial startup mistakes in their partnership agreement. 

Here are some common mistakes to avoid: 

• Skipping key details. Partnership agreements typically include some complex language around specific topics, and people may leave out this language if they don’t understand it. Don’t assume something isn’t necessary just because it reads like fine print.
• Trusting things will work out. People tend to go into business with people they like and trust, leading them to think there won’t be problems later. A partnership agreement exists to resolve these issues when they inevitably arise.
• Not having the agreement reviewed by counsel. Partnership agreements can vary by state and industry, and laws and best practices are constantly changing. If you choose not to have an attorney draft your agreement, at least have one review it before you sign the document.
• Not amending the agreement later. Partnerships evolve, and governing documents must be updated periodically to reflect the changing business. Otherwise, there may be issues that the document can’t resolve.
• Not forming separate partnerships for new ventures. Creating a business is expensive and time-intensive. Sometimes when a partner has an idea for a new business, their first thought is to make it part of their existing partnership. However, this keeps partners from compartmentalizing their liability. Often, their existing partnership agreement isn’t structured to govern new and different businesses.

Business partnership agreements formalize the relationship between partners and enumerate their rights and responsibilities. This limits partner liability and helps resolve disputes. Failing to draft an appropriate agreement can lead to problems later, including significant personal liability.

Why do you need a business partnership agreement?

A business partnership agreement establishes a set of agreed-upon rules and processes that owners sign and acknowledge before problems occur. If any challenges or controversies arise, the business partnership agreement defines how to address them.

“A business partnership is just like a marriage: No one goes into it thinking that it’s going to fail, but if it does fail, it can be nasty,” said Jessica LeMauk, marketing director at Voxtur. “With the right agreements in place, which I’d always recommend be written by a qualified attorney, it makes any potential problems of the business partnership much more easily solved and/or legally enforceable.” 

In other words, a business partnership agreement protects all partners if things go sour. By agreeing to a clear set of rules and principles at the partnership’s outset, partners exist on a level playing field developed by consensus and backed by law.

Business partnership agreements level the playing field

A well-crafted, airtight business partnership agreement clarifies each partner’s expectations, duties and obligations. In business, things change constantly, so it’s crucial to establish a business partnership agreement that can serve as a grounding force in turbulent or uncertain times. A business partnership agreement also defines how the business should grow and governs the addition of new partners.

If you’re going into business with a partner, establish a business partnership agreement while incorporating as an entity. Even if it seems unnecessary today, when an issue arises, you’ll be glad you had an agreement in place.

Dock Treece contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.

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Deciding to go into business with a partner is an extremely important decision. Here are some tips for approaching and creating your partnership agreement.

Deciding to go into business for yourself is a major decision on its own — but deciding to join forces with a partner is a completely different ballpark. If you’re thinking about starting a business with a partner, consider structuring your business as a general partnership.

General partnerships are one of the most common legal business entities, granting ownership to two or more people who share all assets, profits and liabilities. In a general partnership, it’s important to understand that each person is responsible for the business and is liable for the actions of their partner(s). To help avoid any issues with your partners throughout your business journey, you’ll want to write a partnership agreement before moving forward.

[Read: What Is a General Partnership? ]

What is a partnership agreement, and why do you need one?

Nolo noted that, because you and your partners are equally responsible for the business, as well as the outcomes of one another’s decisions, creating a partnership agreement is a great way to structure your relationship with your partners to best suit your business.

Partnership agreements are a protective measure to ensure any and all disagreements can be resolved quickly and fairly, and to understand what to do in the event that the partners wish to dissolve the working relationship or business in its entirety.

What should be in a partnership agreement?

Your partnership agreement needs to cover a lot of ground. According to I nvestopedia , the document should include the following:

• Name of your partnership. While it may seem like common sense, one of the first things you and your partner(s) must agree on is the name of your business.
• Contributions to the partnership and percentage of ownership. Create a list of specific contributions you and your partner(s) will make to the business. In addition to contributions, you must decide on the percentage of ownership, which is typically dictated by each partner’s contributions to the business.
• Division of profits, losses and draws. You and your partner must decide how to divide the business’s profits, losses, and draws. Partners can agree to share the profits and losses in accordance with their percentage of ownership, or they can be distributed equally among the partners regardless of ownership stake.
• Partners’ authority. Partnership authority, also known as binding power, should be defined within the partnership agreement. The ability to bind the business to a debt or a contractual agreement can expose the business to unnecessary risk, which is why the partnership agreement should explicitly state which partner(s) have binding authority.
• Withdrawal or death of a partner. While no one wants to consider the possibility of a partner’s withdrawal or untimely death on the brink of launching a new business, this is something that needs to be clearly stated in the partnership agreement. The agreement should also outline the valuation process for the business and/or any requirements for maintaining a life insurance policy designating the other partner(s) as the beneficiaries.

To avoid conflict and maintain trust between you and your partner(s), be sure to discuss all business goals, the commitment level of each partner and salaries prior to signing the agreement.

How do you structure a 50/50 partnership?

• Discuss/agree on important details before drafting . Structuring a 50/50 partnership requires consent, input, and trust from all business partners. To avoid conflict and maintain trust between you and your partner(s), be sure to discuss all business goals, the commitment level of each partner, and salaries prior to signing the agreement.
• Consult with an attorney. Before you draft or sign a partnership agreement, consult with an experienced business attorney to ensure everyone’s investment in the partnership and business is protected.
• Provide both partners with equal access to all fixed assets. When running your business, you and your business partner will have separate roles and responsibilities but complete and equal access to all fixed assets, including any property and equipment you’ve invested in. Including this detail in your business partnership agreement will help ensure total transparency and trust between you and your partner.
• Include a dispute resolution process. With responsibility for the business split between two partners and the high cost of taking legal action, you should include an official dispute resolution process in your partnership agreement to help navigate arguments.
• Determine how you both will be paid. Your partnership agreement should outline reasonable salary expectations for yourself and your partner. Everyone, investors included, should agree to the terms before finalizing the partnership.

Advantages of a partnership

Some of the several advantages of a general partnership include the following:

Easy to establish

Establishing a partnership is simpler and more straightforward than other business structures. Once you’ve drafted a partnership agreement, all partners must agree to the terms listed and sign the document. And unlike other business entities, you don’t have to file federal paperwork — you simply need to file a few documents locally, like a trade name application and partnership authority.

Easy to dissolve

Partnerships can be as easy to dissolve as they are to establish. If all partners agree to dissolve the partnership amicably, refer to the dissolution clause in your partnership agreement and follow the terms outlined. Additionally, you must consult your state’s laws regarding partnership dissolutions, and you may need to file a statement of dissolution. If you and your partners don’t decide to dissolve the partnership amicably, that could complicate the process, especially if legal action is necessary.

Simplifies your taxes

With partnerships, you don’t have to file additional business entity taxes. Your taxes for the business will pass through to the business owners, which means you’ll need to include your share of the business profits and losses in your individual taxes. You’ll also be responsible for paying any additional taxes individually.

Involves extra help and knowledge

Business owners have to play multiple roles, but when you have a business partner to rely on, you can cover more ground than if you were trying to tackle everything alone. A business partner also brings their business expertise to the company, which could differ from your own knowledge and experience. Ideally, your partner has skills and expertise that complement and enhance your own.

Carries less of a financial burden

Rather than taking on the heavy financial responsibility of starting a business alone, your business partner can help ease some of the financial strain. Having a partner to help cover hefty startup costs can be a massive relief to business owners, with the added benefit of possibly being able to invest more upfront or avoid racking up large sums of debt since you’re splitting the responsibility of covering those costs.

Disadvantages of a partnership

Partnerships also come with a few disadvantages, including the following:

Doesn’t protect partners' personal assets and involves no separation from the business

Unlike other business structures, a partnership does not create a separate legal entity from you and the company or from you and your partner. You are liable for any legal or financial difficulties your business may face. Your personal assets could be at risk since they are not covered by the partnership agreement.

Mutual liability

When starting a partnership, you are legally and financially responsible for your partner and the business. If your partner creates legal trouble for the company, you become liable and open to legal prosecution as well. Not only can this strain your relationship with your business partner, but it also affects your personal finances because, as mentioned above, there’s no legal separation from the business unless you dissolve the partnership.

Provides less independence

Unless explicitly stated in your partnership agreement, your partner has an equal say in all business decisions. If you and your business partner disagree on some of the most fundamental decisions regarding your business, such as expansion opportunities, bringing on a management team, or selling the business, this could cause disagreements between you and your partner, hinder your professional growth, or jeopardize the company.

Requires you to split profits

Having a partner means there’s someone to help cover the business’s costs, but that also means you’ll need to split the profits with them. If you have multiple partners, you could be looking at a significantly smaller profit margin than if you started the business alone.

This story was updated by Julianna Lopez. CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Partnership Agreement

Rating: 4.8 - 2,740 votes

A Partnership Agreement is a contract between two or more individuals who would like to manage and operate a business together in order to make a profit . Each Partner shares a portion of the partnership's profits and losses and each Partner is personally liable for the debt and obligations of the Partnership.

For more information about this form of business, please see the guide Frequently Asked Questions About Business Partnerships .

Note: One benefit of a Partnership is that Partnership income is only taxed once . Partnership income is distributed to the individual Partners who are then taxed on the partnership income. This contrasts with a corporation where income is taxed at two levels: first as a corporate entity and then at the shareholder level where shareholders are taxed on any dividends they receive.

The document is a critical foundational document for running a new business and serves to set the business up for success by ensuring clear communication and defined responsibilities for all of the Partners. This Agreement documents both contingency plans for when things go wrong as well as descriptions of the Partnership's day-to-day operations . A Partnership Agreement protects all of the Partners involved in the business and any individuals who plan to do business together should complete a Partnership Agreement.

This document should be used for the creation of a general partnership. General partnerships are the most common form of partnerships and the easiest to create. A general partnership is different from a limited partnership in that all business partners in a general partnership have total liability, participate in managing the business, and have the ability to agree to business contracts and loans on behalf of the business. Ownership interests (i.e., how much of the business everyone owns) and profits in a general partnership are usually split unevenly, according to an agreement between the partners.

This document is used to create a new partnership. If one of the partners wishes to leave a partnership, they should use a Notice of Withdrawal from Partnership to inform the other members that they are leaving the arrangement. In order to dissolve the partnership entirely so it no longer exists, a Partnership Dissolution Agreeement document should be used.

How to use this document

A Partnership Agreement can be created either as a first step to outline Partner expectations and responsibilities before the Partners begin doing business together or after the Partnership has already been in business if a Partnership Agreement was never created and the Partners wish to codify or clarify how the Partnership operates.

No matter when in the life of a Partnership a Partnership Agreement is created, the Agreement will cover the following ground:

• Partnership name: the legal name under which the Partnership will do business
• Purpose of the Partnership: a brief description of the business that the Partnership will conduct
• Partner information: the legal names and addresses of all of the Partners currently involved in the Partnership
• Capital contributions: a description of the cash, property, services, and other resources initially contributed to the Partnership by each of the Partners
• Ownership interest: a description of the percent of the Partnership owned by each of the Partners
• Profit/Loss distribution: a description of how the profits and losses of the Partnership will be distributed between the Partners, often based on capital contributions and/or ownership interest, and how often distribution will take place
• Management and voting requirements: a description of how the Partnership will be managed , how voting weight will be determined, and whether unanimous or majority votes will be required to make important decisions about the finances and operations of the Partnership
• Partner addition and withdrawal: the guidelines for how the Partnership will handle the addition of Partners, the voluntary withdrawal of Partners, and the involuntary withdrawal of Partners
• Partnership dissolution: an outline of the circumstances under which the Partnership can be dissolved and a description of how the remaining assets of the Partnership will be divided between the Partnership if the Partnership is dissolved

Once the Partnership Agreement is completed, all of the Partners should sign and date the Agreement and keep copies of the Agreement for their records. If the Partners wish to change any of the terms of the Agreement, they should be sure to do so in writing .

Applicable law

Partnership Agreements are subject to the laws of individual states . There is no one federal law covering the requirements for a Partnership Agreement. This is because each individual state governs the businesses formed within that state.

How to modify the template

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.

Guides to help you

• How to Sell your Business
• How to Choose the Best Legal Structure for your Business
• How to Transfer Business Ownership
• Frequently Asked Questions about Business Partnerships
• Going out of Business: Ending or Dissolving a Partnership

Other names for the document:

Partnership Agreement - Updated, Articles of Partnership, Business Partnership Agreement, Creation of Partnership Agreement, Formation of Partnership Agreement

Country: United States

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How to Create a Business Partnership Agreement

4 min. read

Updated October 25, 2023

If you plan on going into business with a business partner, a written partnership agreement is important. If you and your partners don’t spell out your rights and responsibilities in a written business 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 law 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.

Uniform partnership act

Each state (with the exception of Louisiana) has its own laws governing partnerships, contained in what is usually called the “Uniform Partnership Act” or the “Revised Uniform Partnership Act”—or, sometimes, the “UPA” or the “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.

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 put your agreement into a document that specifically sets out the points you and your partners have agreed on.

• What to include in your partnership agreement

Here’s a list of the major areas that most partnership agreements cover. You and your partners-to-be should consider these issues before you put the terms in writing:

• Name of the partnership. One of the first things you must do is agree on a name for your partnership. You can use your own last names, such as Smith & Wesson, or you can adopt and register a fictitious business name, such as Westside Home Repairs. If you choose a fictitious name, you must make sure that the name isn’t already in use.
• Contributions to the partnership. It’s critical that you and your partners work out and record who’s going to contribute cash, property, or services to the business before it opens—and what ownership percentage each partner will have. Disagreements over contributions have doomed many promising businesses.
• Allocation of profits, losses, and draws. Will profits and losses be allocated in proportion to a partner’s percentage interest in the business? And will each partner be entitled to a regular draw (a withdrawal of allocated profits from the business) or will all profits be distributed at the end of each year? You and your partners may have different ideas about how the money should be divided up and distributed, and each of you will have different financial needs, so this is an area to which you should pay particular attention.
• Partners’ authority. Without an agreement to the contrary, any partner can bind the partnership without the consent of the other partners. If you want one or all of the partners to obtain the others’ consent before binding the partnership, you must make this clear in your partnership agreement.
• Partnership decision-making. Although there’s no magic formula or language for divvying up decisions among partners, you’ll head off a lot of trouble if you try to work it out beforehand. You may, for example, want to require a unanimous vote of all the partners for every business decision. If that seems like more than will be necessary, you can require a unanimous vote for major decisions and allow individual partners to make minor decisions on their own. In that case, your partnership agreement will have to describe what constitutes a major or minor decision. You should carefully think through issues like these when setting up the decision-making process for your business.
• Management duties. You might not want to make ironclad rules about every management detail, but you’d be wise to work out some guidelines in advance. For example, who will keep the books? Who will deal with customers? Supervise employees? Negotiate with suppliers? Think through the management needs of your partnership and be sure you’ve got everything covered.
• Admitting new partners. Eventually, you may want to expand the business and bring in new partners. Agreeing on a procedure for admitting new partners will make your lives a lot easier when this issue comes up.
• Withdrawal or death of a partner. At least as important as the rules for admitting new partners to the business are the rules for handling the departure of an owner. You should therefore set up a reasonable buyout scheme in your partnership agreement to deal with this eventuality.
• Resolving disputes. If you and your partners become deadlocked on an issue, do you want to go straight to court? It might benefit everyone involved if your partnership agreement provides for alternative dispute resolution, such as mediation or arbitration.

Have you gone into business with a partner, and did you write up an agreement beforehand? What would you have done differently? Share your stories or questions with us in the comments.

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Legal Templates

Home Business Partnership Agreement Small Business

Small Business Partnership Agreement Template

Use our small business partnership agreement to detail all the key information of a partnership for a small business.

Updated July 2, 2023 Reviewed by Brooke Davis

A small business partnership agreement is a written contract between partners in a small business, setting out each partner’s duties, rights, and profit sharing. It prevents misunderstandings and disputes and protects the company and its partners.

A successful small business partnership is akin to a strong relationship. Both entail not just short-term mutual benefits but long-term compatibility. You need to have the same business vision, mission, and goals. But under the pressure of starting a new business, problems arise and can turn into major setbacks.

Therefore, a small business partnership agreement template should govern the business.

What is a Small Business Partnership Agreement?

When to use a small business partnership agreement, what to include in a small business partnership agreement, small business partnership agreement sample.

A small business partnership agreement defines the precise guidelines for a small business partnership’s successful operations and the roles each partner will play.

The partnership agreement includes how profits and losses are shared amongst the partners, how the business will run in case of a partner withdrawal, and each partner’s rights and obligations.

You should use a small business partnership agreement to form a small business partnership. A partnership agreement is a vital document in the decision-making process of a business.

The absence of such an agreement can negatively affect the decision-making process of both business partners.

For instance, if a partner withdraws from the business, guidelines should be outlined on whether the partnership should be dissolved or reformed.

There will always be conflicts and tough decision-making in the lifespan of a business. A partnership agreement helps to reduce and solve disputes between you and your partner.

Before the formation of any successful business partnership, there are crucial factors that should be put into consideration.

The following factors form the bedrock of any successful joint business:

• Decision making

It is important to note that you and your partner will not agree on everything concerning the business. Therefore, you should develop long-term solutions to dilemmas within the business.

Who needs to make the final say? Which decisions require undivided votes by the partners? You will have a peaceful business by drafting down a non-biased decision-making structure.

• Distributions

The main intention of building the business is to maximize the profits received. Your small business partnership agreement should entail how you will divide business profits and how much each partner will receive.

Your agreement should clearly describe how ownership will change in various scenarios. What happens when a partner withdraws? What are the chances of buying out or absorbing a new partner? What happens if one partner dies, retires, or goes bankrupt?

• Dispute resolution

If things fall apart between partners, how will the disagreements be resolved? Deciding how you will handle disputes sets the foundation for a friction-free business.

• Critical developments

Sometimes, the unpredictable happens, and your small business partnership agreement should address possible concerns and circumstances, such as; what happens when a partner falls sick. What are the retirement provisions?

• Dissolution

A partnership agreement should entail the steps to be taken when legally terminating the partnership. You might opt to do this after you and your partners disapprove of the future of your business.

• Contributions

Ensure you outline each partner’s role in the business formation and running of finances. In your small business partnership agreement, define what each partner brings- monetary value, time, customers, efforts, liabilities, etc.

The below small business partnership agreement template allows you to quickly fill in the blanks and get your partnership up and running. Download in PDF or Word format.

Related Documents

• Business Plan : A plan that guides you through each stage of starting and growing your business.
• Partnership Agreement Amendment : A document detailing any changes to a Partnership Agreement.
• Assignment of Partnership Interest : A legal document that transfers the rights to receive benefits from an original business partner to a new business partner.
• Business Proposal : Use this document to form new relationships with other businesses and organizations.
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Business Partnership Agreement Template

Navigating the modern business world is like setting sail in unpredictable waters; having a reliable compass can be a game-changer.

A business partnership agreement is that compass. It provides structure and security for all parties involved, allowing you to focus on what truly matters: the success of your business.

What is a Business Partnership Agreement?

A business partnership agreement is a legal document outlining each partner’s roles, responsibilities, and financial contributions within a business arrangement. This comprehensive contract is typically established between two or more business owners, forming a safeguard to ensure a harmonious, productive relationship.

The primary purpose of this agreement is to protect all parties involved. It clarifies matters ranging from dispute resolution and capital contributions to profit distribution and amendments. Detailing each partner’s role and expectations can prevent potential misunderstandings, fostering a healthier and more productive business partnership.

Without such an agreement, the business might fall under your state’s default rules, which may not be in the best interest of your partnership. This document serves as a tangible representation of each partner’s understanding, forming the bedrock of your collaborative business endeavor.

DISCLAIMER : We are not lawyers or a law firm and we do not provide legal, business or tax advice. We recommend you consult a lawyer or other appropriate professional before using any templates or agreements from this website.

When to Use a Business Partnership Agreement Template

A business partnership agreement template should be used when entering a business partnership. It’s not only for large corporations but also small businesses and startups. It’s relevant in various industries- technology, food service, or manufacturing. A partnership agreement is essential if two or more individuals collaborate to start or run a business.

One significant advantage of using a template is its simplicity and speed of the process. A template can be a lifesaver, especially when you’re not familiar with the ins and outs of legal language. It provides the basic framework, highlighting the essential elements in your agreement, ensuring you pay attention to important details.

For instance, imagine you’re opening a bakery with a friend. With a business partnership agreement template , you can clearly define your roles—who’ll manage supplies, who’ll handle the baking, how profits will be shared, etc. This transparency will help maintain harmony, facilitate growth, and mitigate potential disputes, ensuring your bakery thrives.

Perhaps you are an artist collaborating with a gallery owner. A partnership agreement can explicitly state the percentage of sales each party receives and detail responsibilities such as marketing and promotion, hosting exhibitions, and artwork transportation.

Similarly, for real estate developers planning a joint venture, a partnership agreement can clarify profit sharing, capital contributions, property acquisition, development duties, and how potential losses would be handled.

These scenarios illustrate the broad applicability of partnership agreements and the ease of a well-structured template.

Download our Partnership Agreement

The implications of not using a business partnership   agreement with partners can be catastrophic to your business. That’s why we’ve created a simple template to help protect your business.

What to Include in a Partnership Agreement Template

When entering into business partnerships, having a clearly defined agreement is critical. Without a precise understanding of each partner’s role within the association and the expectations for both parties to fulfill, you may find yourself in a compromising and overwhelming situation down the line.

A partnership agreement template can provide this clarity by adhering to best practices for accountability and reliability between parties—but what should it include?

Below are some essential factors you should consider when creating your tailored partnership agreement template.

Business Information

The agreement should commence with the basic business information. It should clearly mention the legal name of the business, the type of business (e.g., limited liability company, limited liability partnership agreement,  etc.), the business address, and any other significant details that identify the business.

For instance, if you’re establishing an innovative tech startup, your agreement should clearly state your company name, address, and the fact that you’re in the technology industry.

It’s vital to outline the primary purpose of your business as it helps delineate the boundaries of your operations, providing a clear focus for your partnership.

Partner Information

Understanding who you’re shaking hands with is equally important. Include comprehensive information about each partner, covering their full names, addresses, and contact details.

Beyond the basic partnership details, the agreement should also discuss why the partnership is being formed. Is it for specific expertise, financial contributions, or network access? Make this clear to underline the value each partner brings to the table. For example, if you’re partnering with an industry veteran for their experience and vast network, that should be highlighted here.

Your partnership is not a timeless saga; it needs a defined timeline. This section details the duration of the partnership—when it will start and the circumstances under which it will end.

In some cases, the partnership could be indefinite, continuing until a specific event occurs, such as the retirement or death of a partner or the achievement of a particular goal. Others might have a predetermined end date. Make sure to clarify this upfront to prevent future uncertainty.

Capital Contributions

Nothing can stir the pot of disagreement like money . Therefore, the partner capital contributions of each partner need to be explicitly outlined in your agreement.

This section should include the amount of money, property, or services each partner will contribute to start the business and any expected future contributions. Moreover, the document should clarify how these contributions affect the ownership percentages of each partner.

For example, suppose Partner A contributes $70,000, and Partner B contributes $30,000 to the business. In that case, the agreement might state that Partner A owns 70% of the company while Partner B owns 30%. This reflects their initial capital investments– which may fluctuate over time. 

Roles & Responsibilities

In business partnerships, clarity is the key to a pleasant journey. Clearly defining each partner’s roles and responsibilities can help avoid confusion and disputes in the future. Include who makes day-to-day decisions, oversees employee management, and deals with financial affairs.

For example, in a software development firm, one partner might handle technical aspects while the other manages marketing and customer relations.

It’s not enough to define the roles; responsibilities tied to these roles should also be clearly outlined. This ensures accountability, keeps partners focused, and contributes to the efficient functioning of the business.

Admitting New Partners

Growth often means expansion, which may involve admitting new business partners to the association. Your agreement should include a clause that outlines the process for adding other business partners.

Will it require unanimous consent, or will a majority vote suffice? What will be their capital contributions and ownership share? Spell out these details to streamline any future additions to your business partnership.

Amendments to the Agreement

The business world is dynamic, and your partnership agreement should be flexible enough to accommodate changes. Specify how modifications to the contract can be made.

Will all partners need to agree, or will amendments be made based on majority voting? Providing a straightforward amendment process will ensure your agreement remains relevant and applicable over time.

Dispute Resolution

Even the best business relationships can encounter turbulent waters. Disputes might arise, and having a dispute resolution procedure in place can prevent these disagreements from capsizing your partnership.

Consider including provisions for mediation or arbitration instead of litigation, which can be costly and time-consuming.

Withdrawal or Death

Unfortunate events, such as a partner’s withdrawal or death, should be considered when drafting your partnership agreement.

Provide clear guidelines on what will happen under these circumstances. Will the business continue, or will it dissolve? How will the departing partner’s share be valued and disbursed?

Dissolution

While it’s not something any business partnership wants to consider, preparing for all possibilities, including dissolution, is crucial.

Outline under what circumstances the partnership may dissolve, such as a partner’s retirement or project completion. Specify the process for winding up the business, settling debts, and dividing assets. 

Don’t forget to detail what happens if partners disagree on dissolution. You could require mediation or use a predetermined formula to buy out a partner’s ownership interest.

Voting Rights

Every partner’s voice matters, and the agreement must ensure fair representation of each one.

Voting rights are usually proportional to a partner’s share in the business, but you can also set them equally regardless of capital contribution. Decide whether all decisions need unanimous consent or if a majority is sufficient.

Profit & Loss Distribution

This is the heart of the economic engine that drives your partnership. Establish an explicit formula for distributing profit and loss among partners. It could be equal shares or proportionate to capital contributions or work hours. You might also consider how often distributions occur and what happens in the case of a loss. Be as transparent as possible to prevent future disputes.

Tax & Accounting Information

Here’s where many businesses stumble—financial administration. Identify who is responsible for maintaining the books and handling tax filings. Specify the fiscal year-end and when financial reports are due. Also, consider including a clause that allows partners to inspect financial records upon request.

Remember, these are guidelines, not hard-and-fast rules. Your business is unique, so your partnership agreement should also be. Don’t hesitate to tailor it to your needs. When it’s time to put ink to paper (or, in this digital age, e-signature to PDF), Signaturely is there to help. Secure, efficient, and legally binding, the e-signature solution ensures that closing your business agreement is as smooth as the journey we’ve taken through this guide.

Tips for How to Write a Business Partnership Agreement

Embarking on a business partnership is exciting, but you must ensure the journey is smooth. Here are some handy tips for crafting a comprehensive and transparent partnership agreement:

• Discuss, Discuss, Discuss: Before you even start writing, have thorough conversations with your partners about each aspect of the business. Be open, honest, and ensure everyone’s expectations align.
• Avoid Legal Jargon: Keep the language straightforward so all partners understand the content. If technical terms are necessary, provide definitions.
• Details Matter: Don’t leave anything to assumption. Being explicit prevents future conflicts, whether it’s about duties, dispute resolution, or profit distribution.
• Consider Future Changes: Businesses evolve, and so do partnerships. Include clauses that address possible future scenarios like accepting new partners or buying out existing ones.
• Use an E-signature Platform: An e-signature tool like Signaturely can simplify the process once your agreement is ready. E-signatures save time, provide a secure platform, and gives you a legally binding signature— without the guesswork.

Download our Business Partnership Agreement

Faqs about business partnership agreements.

Below are some of the common questions people have about partnership agreements.

Yes, you can. While getting legal advice is a good idea for complex partnerships, many straightforward agreements can be self-drafted using templates and guidelines.

A simple partnership agreement should include basic details like business information, business partner roles and responsibilities, capital contributions, profit & loss distribution, and provisions for disputes, amendments, and dissolution.

Forming a partnership involves discussing and agreeing on the terms of the partnership, writing and signing a partnership agreement, and registering the partnership with the appropriate government agency .

The simplest form is a general partnership where two or more partners share responsibilities, profits, and liabilities equally.

When signed by all parties, a partnership agreement is legally binding. It can be used in court to resolve disputes. However, the enforceability of specific sections within the contract may vary depending on your state’s regulations.

While starting a partnership without a contract is possible, it’s not advisable. A partnership agreement provides clarity, sets expectations, and protects all partners.

What You Need to Remember About Partnership Agreement Templates

Going through the partnership journey doesn’t have to be a turbulent endeavor. A well-drafted partnership agreement forms a solid foundation, providing clarity, averting misunderstandings, and setting the stage for harmonious cooperation. Infuse it with transparency, detail, flexibility, and legal validity, and you have an agreement that protects and propels your business forward. 

This process becomes even more streamlined with the right tools, such as Signaturely. Remember, your partnership agreement is more than a document; it’s the roadmap to your shared entrepreneurial journey. Embrace it as a necessary step in your path toward collective business success.

Business Partnership Contractual Agreement

• This Business Partnership Contractual Agreement (hereinafter referred to as the “Agreement” ) is entered into on ________________ (the “Effective Date” ), by and between ________________________, with an address of ________________ (hereinafter referred to as the “First Partner” ) and ________________ with an address of ________________ (hereinafter referred to as the “Second Partner” ) (collectively referred to as the “Partners” ).

PARTNERSHIP PURPOSE

The Partners agree that the purpose of this partnership is ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

• The Partners agree that the partnership will begin on the date of signing this Agreement and will continue until its termination.

BUSINESS LOCATION

The Partners agree that the location of the business will be at ________________________ and any change to the location of the business will only occur by providing an attached amendment to this Agreement signed by the Partners.

NEW PARTNERS

The Partners agree that no new partners may be added to this Agreement and partnership.

CAPITAL CONTRIBUTIONS

• The Partners agree to the following capital contributions in case or in property or other forms of contributions. 
• The Partners agree that there will be no interest on any capital payment by either of the partners including any additional capital contributions made. 

PROFITS AND LOSSES

• The Partners agree that the appointed accountants will be responsible to determine the profits and losses of the partnership. 
• The profits and losses will be determined in accordance with the Partners capital contribution values as examined and deduced by the appointed accountants at the end of every fiscal year.

BORROWING OF PARTNERSHIP INTERESTS

• The Partners agree that no money will be borrowed from the business without the prior written consent of the other partner.

FINANCIALS STATEMENTS

• The Partners agree to provide a financial statement at the end of every fiscal year showing the income and expenses of the business indicating and providing each partner’s share of the profits.

The Partners agree that their voting weight is determined as follows: ______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

• The Partners agree that the business will be managed as follows:

______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

• The Partners agree that meetings will occur at the headquarters of the Partnership or in any other place as agreed by the Partners.

Calling of Meetings

• The Partners are entitled to call for a meeting by providing a reasonable notice beforehand.
• The Partners agree that in case of death of either of the partners, the surviving partner will be entitled to purchase the interest of the decedent in the partnership from the heirs and/or assigns. 
• The Partners also agree that the surviving partner will be entitled to terminate this Agreement and partnership. 

TERMINATION

• The Partners agree that this Agreement and partnership may be terminated as follows _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
• The Partners agree that any amendments made to this Agreement must be in writing where they must be signed by both Partners to this Agreement. 
• As such, any amendments made by the Partners will be applied to this Agreement.

SEVERABILITY

In an event where a provision of this Agreement is found to be void and/or unenforceable by a court of competent jurisdiction, then the provisions remaining will continue to be enforced.

DISPUTE RESOLUTION

• Any dispute and/or difference arising out of or related to this Agreement will be submitted to ________________ (Arbitration/mediation/negotiation) according to, and subject to the laws of ________________.

GOVERNING LAW

• This Agreement will be governed by and construed according to the laws of

ENTIRE AGREEMENT

• This Agreement is complete and with respect to the subject matter herein, supersedes all and any prior agreements, understandings, and conditions, expressed or implied, written or oral, of any nature with respect to the subject matter herein. 
• The expressed terms control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms herein.

Signature And Date

The Partners hereby agree to the terms and conditions set forth in this Agreement and such is demonstrated throughout their signatures below:

FIRST PARTNER

SECOND PARTNER

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The implications of not using a business partnership agreement with partners can be catastrophic to your business. That’s why we’ve created a simple template to help protect your business.

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Your Partnership Agreement

PARTNERSHIP AGREEMENT

THIS PARTNERSHIP AGREEMENT (the "Agreement") made and entered into this ________ day of ________________, ________ (the "Execution Date"), BETWEEN:

____________________________ of ___________________________________________________________________, and ____________________________ of ___________________________________________________________________ (individually the "Partner" and collectively the "Partners").

BACKGROUND:

• The Partners wish to associate themselves as partners in business.
• This Agreement sets out the terms and conditions that govern the Partners within the Partnership.

IN CONSIDERATION OF and as a condition of the Partners entering into this Agreement and other valuable consideration, the receipt and sufficiency of which consideration is acknowledged, the parties to this Agreement agree as follows:

• By this Agreement the Partners enter into a general partnership (the "Partnership") in accordance with the laws of the State of Alabama. The rights and obligations of the Partners will be as stated in the applicable legislation of the State of Alabama (the 'Act') except as otherwise provided in this Agreement.
• The firm name of the Partnership will be: _____________________
• The purpose of the Partnership will be: ___________________________________
• The Partnership will begin on April 23rd, 2024 and will continue until terminated as provided in this Agreement.
• Place of Business
• The principal office of the business of the Partnership will be located at ____________________________________________________________ or such other place as the Partners may from time to time designate.
• Initial Capital Contributions
• All Partners must contribute their respective Initial Capital Contributions fully by April 23, 2024.
• Additional Capital
• The capital contribution of a Partner comprises that Partner’s Initial Capital Contribution and any additional capital contribution (the “Additional Capital Contribution”) made by that Partner to the Partnership at a later date (together the “Capital Contribution”). No Partner will be required to make an Additional Capital Contribution. When the Partnership requires additional capital, each Partner will have the opportunity to make an Additional Capital Contribution in proportion to that Partner’s share of the total Capital Contributions to the Partnership. If an individual Partner is unwilling or unable to meet the additional contribution requirement within a reasonable period, as required by Partnership business obligations, then by a unanimous vote of the Partners the remaining Partners may contribute in proportion to their existing Capital Contributions to resolve the amount in default.
• Any advance of money to the Partnership by any Partner in excess of the amounts provided for in this Agreement or subsequently agreed to as Additional Capital Contribution will be deemed a debt owed by the Partnership and not an increase in Capital Contribution of the Partner. This liability will be repaid with interest at rates and times to be determined by a majority of the Partners within the limits of what is required or permitted in the Act. This liability will not entitle the lending Partner to any increased share of the Partnership's profits nor to a greater voting power. Such debts may have preference or priority over any other payments to Partners as may be determined by a majority of the Partners.
• Withdrawal of Capital
• No Partner will withdraw any portion of their Capital Contribution without the express written consent of the remaining Partners.
• Capital Accounts
• An individual capital account (the "Capital Accounts") will be maintained for each Partner and their Initial Capital Contribution will be credited to this account. Any Additional Capital Contributions made by any Partner will be credited to that Partner's individual Capital Account.
• Interest on Capital
• No borrowing charge or loan interest will be due or payable to any Partner on their agreed Capital Contribution inclusive of any agreed Additional Capital Contributions.
• Financial Decisions
• Decisions regarding the distribution of profits, allocation of losses, and the requirement for Additional Capital Contributions as well as all other financial matters will be decided by a unanimous vote of the Partners.
• Profit and Loss
• Subject to any other provisions of this Agreement, the net profits and losses of the Partnership, for both accounting and tax purposes, will accrue to and be borne by the Partners in equal proportions, unless an Additional Capital Contribution has been made which changed the Initial Capital Contribution proportions of the Partners in which case each Partner will share in the net profit and losses of the Partnership in proportion to the new Capital Contributions (the "Profit and Loss Distribution").
• Books of Account
• Accurate and complete books of account of the transactions of the Partnership will be kept in accordance with generally accepted accounting principles (GAAP) and at all reasonable times will be available and open to inspection and examination by any Partner. The books and records of the Partnership will reflect all the Partnership’s transactions and will be appropriate and adequate for the business conducted by the Partnership.
• Annual Report
• a statement of all information as will be necessary for the preparation of each Partner's income or other tax returns;
• a copy of the Partnership's federal income tax returns for that fiscal year; and
• any additional information that the Partners may require.
• Banking and Partnership Funds
• The funds of the Partnership will be placed in such investments and banking accounts as will be designated by the Partners. Partnership funds will be held in the name of the Partnership and will not be commingled with those of any other person or entity.
• Fiscal Year
• The fiscal year will end on December 31 of each year.
• Any of the Partners will have the right to request an audit of the Partnership books. The cost of the audit will be borne by the Partnership. The audit will be performed by an accounting firm acceptable to all the Partners. Not more than one (1) audit will be required by any or all of the Partners for any fiscal year.
• Except as all of the Partners may otherwise agree in writing, all actions and decisions respecting the management, operation and control of the Partnership and its business will be decided by a unanimous vote of the Partners.
• Contract Binding Authority
• Each Partner will have authority to bind the Partnership in contract.
• Tax Elections
• The Partnership will elect out of the application of Chapter 63 Subchapter C of the Internal Revenue Code of 1986, in each taxable year in which it is eligible to do so in accordance with Section 6221(b), by making that election in a timely filed return for such taxable year disclosing the name and taxpayer identification number of each Partner.
• Regular meetings of the Partners will be held only as required.
• Any Partner can call a special meeting to resolve issues that require a vote, as indicated by this Agreement, by providing all Partners with reasonable notice. In the case of a special vote, the meeting will be restricted to the specific purpose for which the meeting was held.
• All meetings will be held at a time and in a location that is reasonable, convenient and practical considering the situation of all Partners.
• Admitting a New Partner
• A new Partner may only be admitted to the Partnership with a unanimous vote of the existing Partners.
• Any new Partner agrees to be bound by all the covenants, terms, and conditions of this Agreement, inclusive of all current and future amendments. Further, a new Partner will execute such documents as are needed to effect the admission of the new Partner. Any new Partner will receive such business interest in the Partnership as determined by a unanimous decision of the other Partners.
• Voluntary Withdrawal of a Partner
• Any Partner will have the right to voluntarily withdraw from the Partnership at any time. Written notice of intention to withdraw must be served upon the remaining Partners at least three (3) months prior to the withdrawal date.
• The voluntary withdrawal of a Partner will result in the dissolution of the Partnership.
• A Dissociated Partner will only exercise the right to withdraw in good faith and will act to minimize any present or future harm done to the remaining Partners as a result of the withdrawal.
• Involuntary Withdrawal of a Partner
• Events resulting in the involuntary withdrawal of a Partner from the Partnership will include but not be limited to: death of a Partner; Partner mental incapacity; Partner disability preventing reasonable participation in the Partnership; Partner incompetence; breach of fiduciary duties by a Partner; criminal conviction of a Partner; Expulsion of a Partner; Operation of Law against a Partner; or any act or omission of a Partner that can reasonably be expected to bring the business or societal reputation of the Partnership into disrepute.
• The involuntary withdrawal of a Partner will result in the dissolution of the Partnership.
• A trustee in bankruptcy or similar third party who may acquire that Dissociated Partner's interest in the Partnership will only acquire that Partner's economic rights and interests and will not acquire any other rights of that Partner or be admitted as a Partner of the Partnership or have the right to exercise any management or voting interests.
• Dissociation of a Partner
• Where the dissociation of a Partner for any reason results in the dissolution of the Partnership then the Partnership will proceed in a reasonable and timely manner to dissolve the Partnership, with all debts being paid first, prior to any distribution of the remaining funds. Valuation and distribution will be determined as described in the Valuation of Interest section of this Agreement.
• The remaining Partners retain the right to seek damages from a Dissociated Partner where the dissociation resulted from a malicious or criminal act by the Dissociated Partner or where the Dissociated Partner had breached their fiduciary duty to the Partnership or was in breach of this Agreement or had acted in a way that could reasonably be foreseen to bring harm or damage to the Partnership or to the reputation of the Partnership.
• Dissolution
• Except as otherwise provided in this Agreement, the Partnership may be dissolved only with the unanimous consent of all Partners.
• Distribution of Property on Dissolution of Partnership
• In the event of the dissolution of the Partnership, each Partner will share equally in any remaining assets or liabilities of the Partnership, unless an Additional Capital Contribution has been made which changed the Initial Capital Contribution proportions of the Partners in which case the Partners will share the assets or liabilities in proportion to their respective Capital Contributions (the “Dissolution Distribution”).
• in satisfaction of liabilities to creditors except Partnership obligations to current Partners;
• in satisfaction of Partnership debt obligations to current Partners; and then
• to the Partners according to the Dissolution Distribution described above.
• The claims of each priority group will be satisfied in full before satisfying any claims of a lower priority group. Any excess of Partnership assets after liabilities or any insufficiency in Partnership assets in resolving liabilities under this section will be shared by the Partners according to the Dissolution Distribution described above.
• Valuation of Interest
• In the absence of a written agreement setting a value, the value of the Partnership will be based on the fair market value appraisal of all Partnership assets (less liabilities) determined in accordance with generally accepted accounting principles (GAAP). This appraisal will be conducted by an independent accounting firm agreed to by all Partners. An appraiser will be appointed within a reasonable period of the date of withdrawal or dissolution. The results of the appraisal will be binding on all Partners. A withdrawing Partner's interest will be based on that Partner's proportion of the Dissolution Distribution described above, less any outstanding liabilities the withdrawing Partner may have to the Partnership. The intent of this section is to ensure the survival of the Partnership despite the withdrawal of any individual Partner.
• No allowance will be made for goodwill, trade name, patents or other intangible assets, except where those assets have been reflected on the Partnership books immediately prior to valuation.
• The goodwill of the Partnership business will be assessed at an amount to be determined by appraisal using generally accepted accounting principles (GAAP).
• Title to Partnership Property
• Title to all Partnership Property will remain in the name of the Partnership. No Partner or group of Partners will have any ownership interest in such Partnership Property in whole or in part.
• Any vote required by the Partnership will be assessed where each Partner receives one vote carrying equal weight, unless an Additional Capital Contribution has been made which changed the Initial Capital Contribution proportions of the Partners in which case each Partner will have voting strength in proportion to Capital Contributions.
• Force Majeure
• A Partner will be free of liability to the Partnership where the Partner is prevented from executing their obligations under this Agreement in whole or in part due to force majeure, such as earthquake, typhoon, flood, fire, and war or any other unforeseen and uncontrollable event where the Partner has communicated the circumstance of said event to any and all other Partners and taken any and all appropriate action to mitigate said event.
• Duty of Loyalty
• No Partner will engage in any business, venture or transaction, whether directly or indirectly, that might be competitive with the business of the Partnership or that would be in direct conflict of interest to the Partnership without the unanimous written consent of the remaining Partners. Any and all businesses, ventures or transactions with any appearance of conflict of interest must be fully disclosed to all other Partners. Failure to comply with any of the terms of this clause will be deemed an Involuntary Withdrawal of the offending Partner and may be treated accordingly by the remaining Partners.
• Duty of Accountability for Private Profits
• Each Partner must account to the Partnership for any benefit derived by that Partner without the consent of the other Partners from any transaction concerning the Partnership or any use by that Partner of the Partnership property, name or business connection. This duty continues to apply to any transactions undertaken after the Partnership has been dissolved but before the affairs of the Partnership have been completely wound up by the surviving Partner or Partners or their agent or agents.
• Duty to Devote Time
• Each Partner will devote such time and attention to the business of the Partnership as the majority of the Partners will from time to time reasonably determine for the conduct of the Partnership business.
• Forbidden Acts
• No Partner may do any act in contravention of this Agreement.
• No Partner may permit, intentionally or unintentionally, the assignment of express, implied or apparent authority to a third party that is not a Partner in the Partnership.
• No Partner may do any act that would make it impossible to carry on the ordinary business of the Partnership.
• No Partner may confess a judgment against the Partnership.
• No Partner will have the right or authority to bind or obligate the Partnership to any extent with regard to any matter outside the intended purpose of the Partnership.
• Any violation of the above Forbidden Acts will be deemed an Involuntary Withdrawal of the offending Partner and may be treated accordingly by the remaining Partners.
• Indemnification
• All Partners will be indemnified and held harmless by the Partnership from and against any and all claims of any nature, whatsoever, arising out of a Partner's participation in Partnership affairs. A Partner will not be entitled to indemnification under this section for liability arising out of gross negligence or willful misconduct of the Partner or the breach by the Partner of any provisions of this Agreement.
• A Partner will not be liable to the Partnership, or to any other Partner, for any mistake or error in judgment or for any act or omission done in good faith and believed to be within the scope of authority conferred or implied by this Agreement or the Partnership.
• Liability Insurance
• The Partnership may acquire insurance on behalf of any Partner, employee, agent or other person engaged in the business interest of the Partnership against any liability asserted against them or incurred by them while acting in good faith on behalf of the Partnership.
• Life Insurance
• The Partnership will have the right to acquire life insurance on the lives of any or all of the Partners, whenever it is deemed necessary by the Partnership. Each Partner will cooperate fully with the Partnership in obtaining any such policies of life insurance.
• This Agreement may not be amended in whole or in part without the unanimous written consent of all Partners.
• Governing Law and Jurisdiction
• This Agreement will be construed in accordance with and exclusively governed by the laws of the State of Alabama
• The Partners submit to the jurisdiction of the courts of the State of Alabama for the enforcement of this Agreement or any arbitration award or decision arising from this Agreement.
• Definitions
• "Additional Capital Contributions" means Capital Contributions, other than Initial Capital Contributions, made by Partners to the Partnership.
• "Capital Contribution" means the total amount of cash or Property contributed to the Partnership by any one Partner.
• "Dissociated Partner" means any Partner who is removed from the Partnership through a voluntary or involuntary withdrawal as provided in this Agreement.
• has engaged in wrongful conduct that adversely and materially affected the Partnership's business;
• has willfully or persistently committed a material breach of this Agreement or of a duty owed to the Partnership or to the other Partners; or
• has engaged in conduct relating to the Partnership's business that makes it not reasonably practicable to carry on the business with the Partner.
• "Initial Capital Contribution" means Capital Contributions made by any Partner to acquire an interest in the Partnership.
• "Operation of Law" means rights or duties that are cast upon a party by the law, without any act or agreement on the part of the individual including, but not limited to, an assignment for the benefit of creditors, a divorce, or a bankruptcy.
• Miscellaneous
• Time is of the essence in this Agreement.
• This Agreement may be executed in counterpart.
• Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine gender include the feminine gender and vice versa. Words in the neuter gender include the masculine gender and the feminine gender and vice versa.
• If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.
• This Agreement contains the entire agreement between the parties. All negotiations and understandings have been included in this Agreement. Statements or representations which may have been made by any party to this Agreement in the negotiation stages of this Agreement may in some way be inconsistent with this final written Agreement. All such statements are declared to be of no value in this Agreement. Only the written terms of this Agreement will bind the parties.
• This Agreement and the terms and conditions contained in this Agreement apply to and are binding upon the Partner's successors, assigns, executors, administrators, beneficiaries, and representatives.
• Any notices or delivery required here will be deemed completed when hand-delivered, delivered by agent, or seven (7) days after being placed in the post, postage prepaid, to the parties at the addresses contained in this Agreement or as the parties may later designate in writing.
• All of the rights, remedies and benefits provided by this Agreement will be cumulative and will not be exclusive of any other such rights, remedies and benefits allowed by law.

IN WITNESS WHEREOF the Partners have duly affixed their signatures under hand and seal on this ________ day of ________________, ________.

Last updated October 18, 2023

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What is a Partnership Agreement?

A Partnership Agreement is a contract between two or more business partners. The partners use the agreement to outline their rights, responsibilities, and profit and loss distribution . The agreement also sets general partnership rules, like withdrawals, capital contributions, and financial reporting. LawDepot's template allows you to create a general partnership agreement.

A general partnership involves two or more general partners who have formed a business for profit. Each partner is equally liable for the debts and obligations of the company and the actions of the other partner(s).

A partner doesn’t need to be an individual. They can also be a corporation or another business entity. Specifying a partner’s legal status is important because it can have tax implications.

A Partnership Agreement is also known as a:

• General Partnership Agreement
• Partnership Contract
• Articles of Partnership
• Business Partnership Agreement

Who needs a Partnership Agreement?

Any two or more people who run a for-profit business together , including family, spouses, friends, or colleagues, should have a Partnership Agreement.

A Partnership Agreement sets out guidelines and rules for business partners to follow to avoid disagreements or issues in the future.

Why is having a Partnership Agreement valuable?

This contract is valuable because it sets out each partner's rights and responsibilities. Further, it allows the partners to customize the law as it applies to their partnership.

Although it's perfectly legal not to have a Partnership Agreement, they come with their advantages. Without an agreement in place, your business is subject to the standard statutes on partnerships in your state. In the United States, 37 states follow the Revised Uniform Partnership Act , and it might have provisions that aren't suitable for your particular partnership or business. By creating your own agreement, you take control of the specifics and customize the applicable law to suit your company perfectly.

For example, a partner leaving the company will cause the dissolution (or end) of the partnership in some states. With a customized Partnership Agreement, you can include clauses to ensure the default rule doesn't apply to your partnership. Instead, you can make it possible for the remaining partners to buy out the exiting partner's interest in the partnership.

What should I include in a Partnership Agreement?

Before you begin creating your Partnership Agreement, there are some crucial details about the partnership to sort out with your partners.

Have details regarding the following topics on hand when creating your document:

• Capital contributions
• Profit and loss distribution
• Management and voting
• Partnership tax elections
• Partnership withdrawal
• Partnership dissolution

How do I create a Partnership Agreement?

Business relationships are complex and require meaningful consideration. In fact, you might draft several versions of a contract before the partners finally agree to sign.

To help you cover all the bases, we’ve broken down this process into five easily digestible sections so you can create your Partnership Agreement at your own pace. 

While our questionnaire walks you through these sections step-by-step, here’s a rough outline of the information you’ll need to prepare.

1. Provide partnership details

Start by specifying the industry you're in and what type of business you’ll run. Our template lets you pick from various industries, including:

• Entertainment and recreation
• Transportation and logistics
• Farming and agriculture
• Construction and repair
• Professional services
• Health and wellness
• Real estate

Describe your business type by explaining the service you’re providing (e.g., bookkeeping, clothing store, dine-in restaurant).

Other partnership details you’ll need to include are:

• Your place of business : Different states have varying rules and regulations for partnerships. Select the state you're operating in, and we’ll customize your document to meet its requirements. 
• Your partnership’s address : This is usually the location of your business’ main office or headquarters. You can use one of the partners’ home addresses if your business doesn’t have a premises.
• When the partnership begins : Pick a date for the partnership to start (if it started in the past, and partners are only now writing an agreement, our questionnaire lets you choose a past date). If you know when the partnership will end, you can also enter an end date.
• Your business name : Business name registration laws prohibit businesses from having similar names because it can confuse customers. You’ll need to carry out a business name search in your state to choose a suitable and available name.

2. Detail the capital contributions of each partner

Start with the name and address of each partner. Any business entity can become a partner in a partnership. This affects how the partnership agreement is signed, and it may have tax implications. So, you must indicate whether each partner is an individual, partnership, trust or LLC, or a corporation.

Then, specify the monetary value of the capital contribution each partner will make and the date that initial contributions are due. Capital contributions are the amount of time, money or assets each partner gives to the business or partnership . You can include non-monetary contributions, as long as the partners can calculate and agree on their value. 

At the outset, it’s important to record what each partner is bringing to the table . This will also have a bearing on who gets what when the partnership ceases doing business.

Next, decide what the partnership rules are in key situations which are likely to arise during the lifetime of the partnership. For example:

• Decide if the partnership will allow new members. If admitting new members is a possibility you want to allow, our template gives you the option of a majority vote or a unanimous vote of the partners.
• Specify notice periods on withdrawal. A partner may make an “amicable exit” as long as they provide an agreed period of notice using a Partnership Withdrawal form. Long notice periods are needed so that the partnership can properly prepare for the partner’s departure. A withdrawal can have huge consequences for the business , especially in a small partnership. You can also decide if a partner leaving automatically causes the partnership’s dissolution. If there are only two partners, dissolution will be the only option if one partner leaves.
• Set terms for voluntary dissolution. This is a significant decision that may have varying consequences for each partner. As such, it’s a best practice to require a unanimous vote to dissolve the partnership . Dissolution can also be involuntary , where there are only two partners and one of them dies, for example. Some of the most common reasons a partnership may need to be dissolved include:
• All partners agree on a specified end date for their partnership
• The partnership completed all its projects or fulfilled its purpose
• The bankruptcy of a partner or the partnership
• A partner withdraws from the partnership
• The business is no longer profitable
• The death of a partner

When dissolving a partnership, you must first pay creditors. Then, the remaining partnership assets are divided amongst the partners or their next of kin (as the case may be in accordance with the rules set out in the Partnership Agreement). The options for distributing assets among the general partners are:

• Equal shares for each partner
• In proportion to capital contributions
• Fixed percent

3. Outline management responsibilities

It’s crucial to set rules for calling partners meetings , which is when the members come together to make critical business and financial decisions.

Decide if the partners will hold meetings weekly, monthly, quarterly, annually, or as required. You’ll also need to determine if any partner can call special meetings, or if those meetings require a majority of partners. The bigger the partnership, the greater the need for formal, scheduled meetings.

Next, decide if you want to appoint a managing partner to be responsible for the overall management and day-to-day operations of the partnership. Don’t forget: certain matters will still require a partners' vote, even if the partners appoint a managing partner . The managing partner is also someone who has an ownership interest in the partnership.

Some businesses decide to appoint a single managing partner, but others have all partners participate in daily operations. If a managing partner will be appointed, you should consider how to remove them from their position (e.g., unanimous or majority vote) if necessary.

Partners are jointly liable for decisions made on behalf of the partnership, even if they weren’t involved or consulted . Some decisions can change the nature of your business, bringing an unanticipated risk to partners that aren’t as financially secure as the others. As such, it’s essential to outline decision-making processes such as:

• Voting methods : When making decisions with a vote, you can give some partners more power than others. Determine if voting power is based on a partner's proportion of aggregate capital contributions, the proportion of profit shares, or if they'll all have equal voting power (one partner, one vote).
• Signing authority : Any person who has the authority to sign contracts on the partnership's behalf can significantly impact your business and the rest of the partners. Decide if the authority to sign contracts will be given to any partner, a managing partner, or subject to a partnership vote. The partnership must communicate any variation to the presumed authority of the partners to third parties, vendors, and business associates.
• Decisions that require unanimous consent: Some decisions involve significant new risks for a partnership. So it’s sometimes appropriate to require the consent of all partners to protect everyone’s interests. For example, you might require unanimous consent when:
• Hiring new employees where salary is over a certain amount
• Selling a partnership asset over a particular value
• Incurring new expenses over a certain amount
• Assuming new debts over a certain amount
• Assigning company check signatories
• Releasing partnership claims except for payment in full
• Making decisions that involve the unusual use or lending of partnership equipment
• Firing employees

4. Prepare for accounting

To prepare for accounting, you’ll need to consider how the partnership will make certain financial decisions . For example, you must determine: 

• If the partnership will make financial decisions unanimously or by majority vote. 
• Whether you will distribute the profits and losses equally, by fixed percentages, or in proportion to capital contributions.
• If partners will receive compensation for services rendered to the partnership (this would be in addition to the regular personal cash withdrawals that partners can take from the partnership's profits).

Next, address tax elections. Of course, taxes can get complicated, so you may wish to speak to a professional for advice on your situation.

But we’ll give you a brief overview of what you should know about partnerships and taxes. 

The first thing to note is that most partnerships are considered pass-through entities when it comes to taxation. While a corporation must pay corporate taxes before the shareholders get dividends, in a partnership, each share of profits passes through the partnership to the corresponding partner (who gets taxed on their partnership income on their personal tax return).

However, federal tax audit rules allow the Internal Revenue Service (IRS) to treat partnerships as taxable entities in their audits instead of conducting individual audits of the partners. The application of these rules depends on the partnership's size and structure.

Partnerships that have 100 or fewer partners and are not multi-tiered (i.e., have no partners that are themselves partnerships, LLCs, or trusts) are eligible to elect out of the application of the rules on an annual basis partnership return.

Partnership agreements should decide on a federal audit policy. If the partnership chooses not to elect out or is ineligible to do so, it will need to choose someone for the role of partnership representative. The partnership representative serves as the IRS's point of contact  under the new tax rules.

Law Depot's Partnership Agreement explains the rules clearly and allows you to:

• If eligible, choose whether the partnership wishes to elect out of the new tax elections. If the partnership elects out, they must renew this decision annually when filing tax returns.
• Make the partnership representative answerable to the partners in their dealings with the IRS.
• Elect to have each partner individually assessed for their share of the tax liability if an audit assesses a tax liability at the partnership level.

5. Add final details

A time may eventually come when partners clash with each other. To help avoid costly litigation, you may wish to have a plan for handling disputes in your Partnership Agreement.

What’s more, you may need to add a clause that’s specific to your situation and not covered by the template. If so, we’ll give you tips on how to write extra terms or information into the document. 

You can also ask a lawyer to review your contract after you’ve drafted it for extra peace of mind.

Can I change or modify a Partnership Agreement?

Yes, it’s sometimes necessary to update the partnership agreement. A Partnership Agreement can be changed or modified at any time with the unanimous agreement of the partners.

Related Documents:

• Notice of Withdrawal from Partnership : a notice used to inform partners of the intended withdrawal of a partner from a business partnership
• Assignment of Partnership Interest : a contract used to transfer partnership interest from one partner to another
• Partnership Amending Agreement : an agreement used to amend or modify the terms of a partnership agreement
• Joint Venture Agreement : a document used to spell out the details in which two parties unite resources for a common goal or project
• LLC Operating Agreement : an agreement that outlines the rights and responsibilities of the company's members and establishes the rules and operating details for a limited liability company
• Business Plan : a comprehensive document defining a company's mission, values, goals, marketing and sales plan, financial projections, employee and management information
• One Page Business Plan : a succinct, one-page version of our Business Plan to help you outline your business's goals and how you plan to achieve them.

Customize your Partnership Agreement. Print or download in minutes.

Create Your Partnership Agreement

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Small Business Partnership Agreement Template

Used 5,333 times

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This small business partnership agreement template can be used by two companies who wish to form a joint venture with one another.

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Prepared by:

​ [PartnerA.FirstName] [PartnerA.LastName] [PartnerA.Company] ​

Prepared for:

​ [PartnerB.FirstName] [PartnerB.LastName] ​ [PartnerB.Company] ​

This small business partnership agreement, entered into on [Document.CreatedDate] is by and between the following entities:

​ [PartnerA.Company] ​ [PartnerA.StreetAddress] [PartnerA.City] [PartnerA.State] [PartnerA.PostalCode] ​ [PartnerA.Phone] ​

​ [PartnerB.Company] ​ [PartnerB.StreetAddress] [PartnerB.City] [PartnerB.State] [PartnerB.PostalCode] ​ [PartnerB.Phone] ​

Unlimited templates & signatures for 19$/month

By signing below, the listed individuals certify that they have full authority to represent the partners to this agreement, and hereby enter into this small business partnership agreement.

​ [PartnerA.Company] ​ [PartnerA.FirstName] [PartnerA.LastName] ​

​ [PartnerB.Company] ​ [PartnerB.FirstName] [PartnerB.LastName]

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Business Partnership Agreement

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What is a business partnership agreement.

A business partnership agreement, also known as a partnership contract or articles of partnership, is a legally binding document that determines the roles and responsibilities between two individuals or entities acting as business partners. For partnership agreements to be enforceable, they should contain specific elements and provisions that comply with local, state, and federal contract law.

What Is A Business Partnership?

A business partnership is a formal agreement between two parties operating and managing a company and share in its profits or losses. While there are risks associated with business partnerships, they can flourish successfully and generate significant revenue for both partners.

Business partnerships work well for several types of professions, including:

• Accountants
• Contractors
• Marketing professionals
• Financial managers

Like a sole-proprietorship, most business partnerships do not shield owners from legal and financial exposure. Partners are liable personally for all debts and paying income tax on profits and losses. The exceptions to this are Limited Liability Partnership (LLP) and a Professional limited liability partnership (PLLP), which we will address later in this article. The most important advantages of a business partnership are that they are less complicated to form and carry lower taxes than other structures.

Roles And Responsibilities

Legal responsibilities apply to all members of every partnership. In general, they must keep financial records accurate, pay taxes, and provide overall managerial direction, unless they are silent partners. Silent partners share in the profit and loss of a business partnership without exercising operational control.

Depending upon the type of business partnership and industry, partners must share in the following roles and responsibilities:

• Managing employees
• Implementing marketing strategies
• Developing client relationships
• Tracking financial objectives
• Executing other strategic management activities

As you can see, a business partner’s duties are primarily related to everyday managerial activities focused on growth. Several factors determine the scope and depth of each partner’s role, including the type of partnership chosen from a legal and structural standpoint.

Types Of Partnerships

There are a few types of partnerships from a legal and taxation standpoint. The structure you and your partners use will vary by industry, investment strategy, willingness to take on personal liability, relationship strength, individual backgrounds, and location. Consider your options prudently before making a decision.

The four main types of partnerships include:

• General partnership (GP) : A general partnership is where two or more owners carry out the business’ purpose. They share equal responsibility and rights while retaining liability for all obligations and debts. General partnerships allow owners to use a passthrough tax advantage that can result in lower tax rates.
• Limited partnership (LP) : A limited partnership restricts the amount of personal liability involved for investment purposes. While there must be at least one general partner , limited partnerships allow the business to receive operating capital. The limited partner will also receive profits or pay for losses.
• Limited Liability Partnership (LLP) : An LLP retains a general partnership’s tax privileges while offering protection from personal liability to partner members. These safeguards include protection from loss or civil liability resulting from wrongdoings committed by other partners.
• Professional limited liability partnership (PLLP) : A PLLP is an LLP comprised of licensed professionals, such as accountants, lawyers, and medical professionals since some states do not allow them to form as LLPs. The central difference between them is that PLLPs must provide proof of licensure for all members to operate lawfully.

When it comes to structuring your partnership, ensure that you choose an entity type best suited for your situation and business needs. Legal mistakes can become costly endeavors. Speak with a small business lawyer if you have questions or need advice when forming a partnership in your state.

See Business Partnership Agreement Pricing by State

• Connecticut
• District of Columbia
• Massachusetts
• Mississippi
• New Hampshire

North Carolina

• North Dakota
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• West Virginia

What’s Included In A Business Partnership Agreement

While every business partnership agreement is different, the primary elements are generally the same. However, it should speak to your specific partnership and operation since no two organizations are alike.

Below are common elements included in a business partnership agreement:

• Partnership’s name and location that you will provide on taxes and legal documents
• Required contributions made by each member, such as time, resources, and capital, and at what rate and frequency
• How partners will allocate profits and losses
• Decision-making powers and authorities delegated to each member
• Process for handling business partnership terminations, including the event of death
• Whether you will allow new partners or not and how you will onboard them
• How you will handle and limit civil dispute processes when seeking resolution or remedy from a partner’s wrongdoing

You and your business partners can address many of the details included in a business partnership agreement by drafting an operating agreement first. An operating agreement is generally used in conjunction with the Articles of Incorporation filing to receive Certificates of Incorporation . However, you can apply the identical principle to partnerships for greater understanding by partner members.

Why Business Partnership Agreements Are Important

A business partnership agreement may be one of the most critical documents that form your business from a legal and financial standpoint. When partners do not know what to anticipate, it can lead to partner disagreements in the future. Try to minimize the potential for disputes at all costs by taking the time to implement a business partnership agreement.

Here are four reasons why business partnership agreements are important:

• Establishes the percentage of ownership allocated to partners, including profitability
• Determines how much control by a percentage each partner holds, including decision-making power
• Expresses the assignment of liability held by individual partner members
• Leaves a set of instructions for remaining members regarding how to handle the deceased partner’s company stake

Theoretically, a business partnership agreement offers guidance to partners regarding their obligations and considerations for meeting them. However, many business owners may work through this process too quickly. The most practical approach is to take your time, if you can, and work with a contract lawyer to provide advice.

How To Write A Business Partnership Agreement

When it comes to writing a business partnership agreement, there is no specific length or way to write it. Since businesses evolve, you can write in provisions that help you address these needs for greater flexibility.

The steps for how to write a business partnership agreement include:

• Draft an initial general operating agreement
• Determine how you will treat the addition of new limited partners
• Determine how you will treat the addition of new full partners
• Create a continuity and succession plan in case a partner leaves

When drafting a business partnership agreement, there are several resources available online to assist you. However, these agreements may not be specific to your situation. For example, using an LLC operating agreement to address a partnership operating agreement’s needs may exclude necessary provisions and guidelines.

Working With A Lawyer To Prepare Your Business Partnership Agreement

Instead of using an online template, work with a small business lawyer to prepare your business partnership agreement. They can provide guidance and advice while ensuring that the contract is proper for your industry and jurisdiction and help you file the necessary legal documents to establish your partnership with the state.

Need help with a Business Partnership Agreement?

Meet some of our business partnership agreement lawyers.

I am a business attorney with years of experience advising individual entrepreneurs and small businesses on issues ranging from entity selection/formation to employment law compliance, to intellectual property protection and exploitation. I often act as General Counsel for my clients fulfilling the legal function as part of a team of managers. I look forward to learning more about your business and how I may be of assistance.

Charlton M.

Charlton Messer helps businesses and their owners with general counsel and contract drafting services. He has helped over 500 businesses with their legal needs across a variety of industries in nearly a decade of practice.

Over 30 years of experience practicing commercial real estate and complex business litigation law.

Orly Boger has worked in the high tech industry and in a leading law firm before launching her law firm. Orly focuses on startup companies and technology transactions. She structures and negotiates software and technology license agreements, strategic partnerships, cloud-based/SaaS agreements, internet related transactions, OEM agreements, supply, distribution, telecommunications. In addition, Orly has experience in serving as an in-house legal counsel for start up companies at various phases of their development, providing strategic legal advise to entrepreneurs and emerging companies with a comprehensive understanding of the business and legal issues. She has been helping companies develop a legal strategy for all aspects of their operations, from commercial transactions and partnerships, scalable SaaS or services agreements, privacy policies, employment related policies, open source licensing and much more.

Corporate attorney with 14+ years of in-house counsel, people leadership and client management experience. Provides legal expertise and a business-oriented approach to problem solving and building lines of business. Consistently works under pressure, prioritizing and managing workload and simultaneous tasks to meet deadlines in a changing, fast-paced environment.

Seasoned professional with experience in wide variety of contract negotiation and review.

I have been in practice for over 19 years. I have substantial experience across the spectrum of civil practice areas both as a litigator and transactional counsel. This includes: negotiating commercial and real estate transactions, corporate organization, commercial agreements, and resolving commercial disputes, and litigating numerous civil, administrative, and criminal cases through all phases of litigation from trial through appeal, as well as judgment enforcement. My vast experience as a litigator is an asset to my transactional clients. My background in Investigating and proving the breakdown of business relationships in court allows me a unique advantage in drafting, negotiating, and closing business transactions.

Find the best lawyer for your project

Zied kefi partnership.

I wanna open restaurant with my friend and make legal partnership documents

You have the right idea to put the partnership in writing. Your attorney will be able to help you think through several issues: investment into the business, operating the business, the potential to add more partners or investors, and an exit strategy for each partner or both partners. The document to start with is a business partnership agreement that outlines the ground rules for your partnership based on the Tennessee law. It can be a very straightforward document, or more complex depending on your needs. For instance, you may also want to create a statement of partnership authority which designates which partners have the authority to enter into agreements on behalf of the partnership, or it may limit the authority of certain partners. This is the kind of business agreement I help small business owners with regularly, and I invite you to request a bid for my services on your project through ContractsCounsel.

Business partnership agreement for short projects?

I am looking to start a business partnership with another individual. We are both interested in working together on short-term projects, but we want to ensure that our partnership is legally binding and properly structured to protect both of our interests. We have discussed the details of our agreement, but I would like to have a lawyer review the agreement to ensure that it is legally sound.

In a partnership, each of you is liable for all debts of the partnership. Your personal assets are at risk if anything goes wrong. You should set up as a limited liability company. That way, only the LLC can be liable, and you will not be personally liable. To se up an LLC, you need a filing with the state, an Operating Agreement, and an Employer Identification Number from the IRS. The Operation Agreement is, in effect, a partnership agreement. I offer flat fee packages for these services. Thx. JV

Can I withdraw from a business partnership agreement?

I am currently in a business partnership agreement with a colleague, and I am considering withdrawing from the partnership. We have been in the agreement for over a year and our goals and objectives have changed. I am looking for legal advice on the steps I need to take to withdraw from the agreement, and the potential legal implications of doing so.

N'kia N.

Below is a general overview of how the process of a partner withdrawing from a partnership commonly plays out: The withdrawing partner gives written notice of withdrawal. The parties obtain business valuations to determine payout terms. The parties execute some type of withdrawal or buyout agreement that states rights, responsibilities, and restrictions (such as non-competition and non-disclosure/confidentiality), and other important terms of the deal. A partner who is considering withdrawing from the partnership should consider consulting with a knowledgeable attorney who can review the Partnership Agreement and the terms of a proposed withdrawal or buyout agreement, and either guide the partner through handling the process without representation or represent the partner through the withdrawal. Additionally, the partner might consider consulting with a tax professional regarding tax liabilities. [It is often beneficial for the partner to seek assistance from an independent attorney or tax professional, rather than one who represents the partnership or another partner.]

What to include in a business partnership agreement?

I want to learn what terms are typical in a partnership agreement. Background - I am wanting to create a partnership with an SEO agency (I provide digital ads/SEM services). I want to make sure we have the right terms around profit sharing and making sure they don't poach my clients without me getting a cut of the revenue. Any help is appreciated.

I recommend hiring an experienced corporate attorney to help negotiate and draft the agreement. You can't be given a list of 3 or 5 pointers and then expect to negotiate the agreement yourself. There are too many pitfalls. And you wouldn't expect someone to come to you and ask you how they can do for themselves what you do, right? It's more complicated than that, and there's a reason you're a professional.

Business Contracts

Multilingual business partnership agreement?

I am looking to enter into a business partnership with a foreign partner and we would like to ensure that both parties are aware of the terms of the agreement. We want to make sure that the agreement is in our native language as well as the language of our partner in order to ensure that both parties have the same understanding of the agreement. We are looking for advice on how to draft a multilingual business partnership agreement.

Generally speaking, contracts should be in a language that all the parties understand. However, many legal terms do not have exact translations in other languages. Therefore, many businesses that use multilingual contracts will identify one language as the contract's "official" language. Anyone who is considering using a multilingual business contract, including a business partnership agreement, should also consider using translators who are well versed in "legalese" in the languages to be used in the contract.

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Location: ohio, turnaround: a week, service: contract review, doc type: business partnership agreement, page count: 35, number of bids: 6, bid range: $350 - $800, revenue sharing agreement, location: new york, turnaround: less than a week, service: drafting, number of bids: 14, bid range: $600 - $1,500, related contracts.

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Free Business Partnership Agreement Template for Microsoft Word

Download this free Business Partnership Agreement template as a Word document to help establish a business in partnership with another individual

Business Partnership Agreement

THIS PARTNERSHIP AGREEMENT (the “Agreement”) made and entered into this [Insert date] (the “Execution Date”),

BETWEEN: [Insert name] of [Insert address]

[Insert name] of [Insert address] (individually the “Partner” and collectively the “Partners”).

BACKGROUND:

A. The Partners wish to associate themselves as partners in business. B. This Agreement sets out the terms and conditions that govern the Partners within the Partnership.

IN CONSIDERATION OF and as a condition of the Partners entering into this Agreement and other valuable consideration, the receipt and sufficiency of which consideration is acknowledged, the parties to this Agreement agree as follows:

1. By this Agreement the Partners enter into a general partnership (the “Partnership”) in accordance with the laws of [Insert state or country. The rights and obligations of the Partners will be as stated in the applicable legislation of [Insert State or Country] (the ‘Act’) except as otherwise provided in this Agreement.

2. The firm name of the Partnership will be: [Insert business name]

3. The purpose of the Partnership will be: [Insert business description]

4. The Partnership will begin on [Insert date] and will continue until terminated as provided in this Agreement.

Place of Business

5. The principal office of the business of the Partnership will be located at [Insert address] or such other place as the Partners may from time to time designate.

Capital Contributions

6. Each of the Partners has contributed to the capital of the Partnership, in cash or property in agreed upon value, as follows (the “Capital Contribution”):

[Insert name of Partner #1] $ [Insert amount]

[Insert name of Partner #2] $ [Insert amount]

7. All Partners will contribute their respective Capital Contributions fully and on time.

Withdrawal of Capital

8. No Partner will withdraw any portion of their Capital Contribution without the express written consent of the remaining Partners. Additional Capital

9. Capital Contributions may be amended from time to time, according to the requirements of the Partnership provided that the interests of the Partners are not affected, except with the unanimous consent of the Partners. No Partner will be required to make Additional Capital Contributions. Whenever additional capital is determined to be required and an individual Partner is unwilling or unable to meet the additional contribution requirement within a reasonable period, as required by Partnership business obligations, remaining Partners may contribute in proportion to their existing Capital Contributions to resolve the amount in default. In such case the allocation of profits or losses among all the Partners will be adjusted to reflect the aggregate change in Capital Contributions by the Partners.

10. Any advance of money to the Partnership by any Partner in excess of the amounts provided for in this Agreement or subsequently agreed to as Additional Capital Contribution will be deemed a debt owed by the Partnership and not an increase in Capital Contribution of the Partner. This liability will be repaid with interest at rates and times to be determined by a majority of the Partners within the limits of what is required or permitted in the Act. This liability will not entitle the lending Partner to any increased share of the Partnership’s profits nor to a greater voting power. Such debts may have preference or priority over any other payments to Partners as may be determined by a majority of the Partners.

Capital Accounts

11. An individual capital account (the “Capital Accounts”) will be maintained for each Partner and their Initial Capital Contribution will be credited to this account. Any Additional Capital Contributions made by any Partner will be credited to that Partner’s individual Capital Account.

Interest on Capital

12. No borrowing charge or loan interest will be due or payable to any Partner on their agreed Capital Contribution inclusive of any agreed Additional Capital Contributions.

Financial Decisions

13. Decisions regarding the distribution of profits, allocation of losses, and the requirement for Additional Capital Contributions as well as all other financial matters will be decided by a unanimous vote of the Partners.

Profit and Loss

14. Subject to any other provisions of this Agreement, the net profits and losses of the Partnership, for both accounting and tax purposes, will accrue to and be borne by the Partners in equal proportions (the “Profit and Loss Distribution”).

Books of Account

15. Accurate and complete books of account of the transactions of the Partnership will be kept in accordance with generally accepted accounting principles and at all reasonable times will be available and open to inspection and examination by any Partner. The books and records of the Partnership will reflect all the Partnership’s transactions and will be appropriate and adequate for the business conducted by the Partnership.

Annual Report

16. As soon as practicable after the close of each fiscal year, the Partnership will furnish to each Partner an annual report showing a full and complete account of the condition of the Partnership. This report will consist of at least the following documents: a. a statement of all information as will be necessary for the preparation of each Partner’s income or other tax returns; b. a copy of the Partnership’s federal income tax returns for that fiscal year; and c. any additional information that the Partners may require.

Banking and Partnership Funds

17. The funds of the Partnership will be placed in such investments and banking accounts as will be designated by the Partners. Partnership funds will be held in the name of the Partnership and will not be commingled with those of any other person or entity.

Fiscal Year

18. The fiscal year will end on the ______ day of ________________ of each year.

19. Any of the Partners will have the right to request an audit of the Partnership books. The cost of the audit will be borne by the Partnership. The audit will be performed by an accounting firm acceptable to all the Partners. Not more than one (1) audit will be required by any or all of the Partners for any fiscal year.

20. Except as all of the Partners may otherwise agree in writing, all actions and decisions respecting the management, operation and control of the Partnership and its business will be decided by a unanimous vote of the Partners.

Contract Binding Authority

21. Each Partner will have authority to bind the Partnership in contract.

22. Regular meetings of the Partners will be held as required.

23. Any Partner can call a special meeting to resolve issues that require a vote, as indicated by this Agreement, by providing all Partners with reasonable notice. In the case of a special vote, the meeting will be restricted to the specific purpose for which the meeting was held.

24. All meetings will be held at a time and in a location that is reasonable, convenient and practical considering the situation of all Partners.

Admitting a New Partner

25. A new Partner may only be admitted to the Partnership with a unanimous vote of the existing Partners.

26. Any new Partner agrees to be bound by all the covenants, terms, and conditions of this Agreement, inclusive of all current and future amendments. Further, a new Partner will execute such documents as are needed to effect the admission of the new Partner. Any new Partner will receive such business interest in the Partnership as determined by a unanimous decision of the other Partners.

Voluntary Withdrawal of a Partner

27. Any Partner will have the right to voluntarily withdraw from the Partnership at any time. Written notice of intention to withdraw must be served upon the remaining Partners at least three (3) months prior to the withdrawal date.

28. The voluntary withdrawal of a Partner will result in the dissolution of the Partnership.

29. A Dissociated Partner will only exercise the right to withdraw in good faith and will act to minimise any present or future harm done to the remaining Partners as a result of the withdrawal.

Involuntary Withdrawal of a Partner

30. Events resulting in the involuntary withdrawal of a Partner from the Partnership will include but not be limited to: death of a Partner; Partner mental incapacity; Partner disability preventing reasonable participation in the Partnership; Partner incompetence; breach of fiduciary duties by a Partner; criminal conviction of a Partner; Expulsion of a Partner; Operation of Law against a Partner; or any act or omission of a Partner that can reasonably be expected to bring the business or societal reputation of the Partnership into disrepute.

31. The involuntary withdrawal of a Partner will result in the dissolution of the Partnership.

32. A trustee in bankruptcy or similar third party who may acquire that Dissociated Partner’s interest in the Partnership will only acquire that Partner’s economic rights and interests and will not acquire any other rights of that Partner or be admitted as a Partner of the Partnership or have the right to exercise any management or voting interests.

Dissociation of a Partner

33. Where the dissociation of a Partner for any reason results in the dissolution of the Partnership then the Partnership will proceed in a reasonable and timely manner to dissolve the Partnership, with all debts being paid first, prior to any distribution of the remaining funds. Valuation and distribution will be determined as described in the Valuation of Interest section of this Agreement.

34. The remaining Partners retain the right to seek damages from a Dissociated Partner where the dissociation resulted from a malicious or criminal act by the Dissociated Partner or where the Dissociated Partner had breached their fiduciary duty to the Partnership or was in breach of this Agreement or had acted in a way that could reasonably be foreseen to bring harm or damage to the Partnership or to the reputation of the Partnership.

Dissolution

35. Except as otherwise provided in this Agreement, the Partnership may be dissolved only with the unanimous consent of all Partners.

Distribution of Property on Dissolution of Partnership

36. In the event of the dissolution of the Partnership, each Partner will share equally (the “Dissolution Distribution”) in any remaining assets or liabilities of the Partnership.

37. Upon Dissolution of the Partnership and liquidation of Partnership Property, and after payment of all selling costs and expenses, the liquidator will distribute the Partnership assets to the following groups according to the following order of priority:

a. in satisfaction of liabilities to creditors except Partnership obligations to current Partners; b. in satisfaction of Partnership debt obligations to current Partners; and then c. to the Partners according to the Dissolution Distribution described above.

38. The claims of each priority group will be satisfied in full before satisfying any claims of a lower priority group. Any excess of Partnership assets after liabilities or any insufficiency in Partnership assets in resolving liabilities under this section will be shared by the Partners according to the Dissolution Distribution described above.

Valuation of Interest

39. In the absence of a written agreement setting a value, the value of the Partnership will be based on the fair market value appraisal of all Partnership assets (less liabilities) determined in accordance with generally accepted accounting principles. This appraisal will be conducted by an independent accounting firm agreed to by all Partners. An appraiser will be appointed within a reasonable period of the date of withdrawal or dissolution. The results of the appraisal will be binding on all Partners. A withdrawing Partner’s interest will be based on that Partner’s proportion of the Dissolution Distribution described above, less any outstanding liabilities the withdrawing Partner may have to the Partnership. The intent of this section is to ensure the survival of the Partnership despite the withdrawal of any individual Partner.

40. No allowance will be made for goodwill, trade name, patents or other intangible assets, except where those assets have been reflected on the Partnership books immediately prior to valuation.

41. The goodwill of the Partnership business will be assessed at an amount to be determined by appraisal using generally accepted accounting principles.

Title to Partnership Property

42. Title to all Partnership Property will remain in the name of the Partnership. No Partner or group of Partners will have any ownership interest in such Partnership Property in whole or in part.

43. Any vote required by the Partnership will be assessed where each Partner receives one vote carrying equal weight.

Force Majeure

44. A Partner will be free of liability to the Partnership where the Partner is prevented from executing their obligations under this Agreement in whole or in part due to force majeure, such as earthquake, typhoon, flood, fire, and war or any other unforeseen and uncontrollable event where the Partner has communicated the circumstance of said event to any and all other Partners and taken any and all appropriate action to mitigate said event.

Duty of Loyalty

45. No Partner will engage in any business, venture or transaction, whether directly or indirectly, that might be competitive with the business of the Partnership or that would be in direct conflict of interest to the Partnership without the unanimous written consent of the remaining Partners. Any and all businesses, ventures or transactions with any appearance of conflict of interest must be fully disclosed to all other Partners. Failure to comply with any of the terms of this clause will be deemed an Involuntary Withdrawal of the offending Partner and may be treated accordingly by the remaining Partners.

Duty of Accountability for Private Profits

46. Each Partner must account to the Partnership for any benefit derived by that Partner without the consent of the other Partners from any transaction concerning the Partnership or any use by that Partner of the Partnership property, name or business connection. This duty continues to apply to any transactions undertaken after the Partnership has been dissolved but before the affairs of the Partnership have been completely wound up by the surviving Partner or Partners or their agent or agents.

Duty to Devote Time

47. Each Partner will devote such time and attention to the business of the Partnership as the majority of the Partners will from time to time reasonably determine for the conduct of the Partnership business.

Forbidden Acts

48. No Partner may do any act in contravention of this Agreement.

49. No Partner may permit, intentionally or unintentionally, the assignment of express, implied or apparent authority to a third party that is not a Partner in the Partnership.

50. No Partner may do any act that would make it impossible to carry on the ordinary business of the Partnership.

51. No Partner may individually consent to a judgment against the Partnership.

52. No Partner will have the right or authority to bind or obligate the Partnership to any extent with regard to any matter outside the intended purpose of the Partnership.

53. Any violation of the above Forbidden Acts will be deemed an Involuntary Withdrawal of the offending Partner and may be treated accordingly by the remaining Partners.

Indemnification

54. All Partners will be indemnified and held harmless by the Partnership from and against any and all claims of any nature, whatsoever, arising out of a Partner’s participation in Partnership affairs. A Partner will not be entitled to indemnification under this section for liability arising out of gross negligence or wilful misconduct of the Partner or the breach by the Partner of any provisions of this Agreement.

55. A Partner will not be liable to the Partnership, or to any other Partner, for any mistake or error in judgment or for any act or omission done in good faith and believed to be within the scope of authority conferred or implied by this Agreement or the Partnership.

Liability Insurance

56. The Partnership may acquire insurance on behalf of any Partner, employee, agent or other person engaged in the business interest of the Partnership against any liability asserted against them or incurred by them while acting in good faith on behalf of the Partnership.

Life Insurance

57. The Partnership will have the right to acquire life insurance on the lives of any or all of the Partners, whenever it is deemed necessary by the Partnership. Each Partner will cooperate fully with the Partnership in obtaining any such policies of life insurance.

58. This Agreement may not be amended in whole or in part without the unanimous written consent of all Partners. Governing Law and Jurisdiction

59. This Agreement will be construed in accordance with and exclusively governed by the laws of The State of New South Wales.

60. The Partners submit to the jurisdiction of the courts of New South Wales for the enforcement of this Agreement or any arbitration award or decision arising from this Agreement.

Definitions

61. For the purpose of this Agreement, the following terms are defined as follows:

a. “Additional Capital Contributions” means Capital Contributions, other than Initial Capital Contributions, made by Partners to the Partnership. b. “Capital Contribution” means the total amount of cash or Property contributed to the Partnership by any one Partner. c. “Dissociated Partner” means any Partner who is removed from the Partnership through a voluntary or involuntary withdrawal as provided in this Agreement. d. “Expulsion of a Partner” can occur on application by the Partnership or another Partner, where it has been determined that the Partner: i. has engaged in wrongful conduct that adversely and materially affected the Partnership’s business; ii. has wilfully or persistently committed a material breach of this Agreement or of a duty owed to the Partnership or to the other Partners; or iii. has engaged in conduct relating to the Partnership’s business that makes it not reasonably practicable to carry on the business with the Partner. e. “Initial Capital Contribution” means Capital Contributions made by any Partner to acquire an interest in the Partnership. f. “Operation of Law” means rights or duties that are cast upon a party by the law, without any act or agreement on the part of the individual including, but not limited to, an assignment for the benefit of creditors, a divorce, or a bankruptcy.

Miscellaneous

62. Time is of the essence in this Agreement.

63. This Agreement may be executed in counterpart.

64. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine gender include the feminine gender and vice versa. Words in the neuter gender include the masculine gender and the feminine gender and vice versa.

65. If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties’ intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.

66. This Agreement contains the entire agreement between the parties. All negotiations and understandings have been included in this Agreement. Statements or representations which may have been made by any party to this Agreement in the negotiation stages of this Agreement may in some way be inconsistent with this final written Agreement. All such statements are declared to be of no value in this Agreement. Only the written terms of this Agreement will bind the parties.

67. This Agreement and the terms and conditions contained in this Agreement apply to and are binding upon the Partner’s successors, assigns, executors, administrators, beneficiaries, and representatives.

68. Any notices or delivery required here will be deemed completed when hand-delivered, delivered by agent, or seven (7) days after being placed in the post, postage prepaid, to the parties at the addresses contained in this Agreement or as the parties may later designate in writing.

69. All of the rights, remedies and benefits provided by this Agreement will be cumulative and will not be exclusive of any other such rights, remedies and benefits allowed by law.

IN WITNESS WHEREOF the Partners have duly affixed their signatures under hand and seal on this [Insert date]

_______________________________ WITNESS: ______________________ Address: ________________________ Occupation: _____________________ _______________________________ ______________________(Partner)

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Top 10 Partnership Plan Templates with Examples and Samples

DivyanshuKumar Rai

When partners enter a business at the outset, they are motivated and excited to embark on this exciting new adventure together. Initially, they agree on almost everything. These new entrepreneurs think they will be in business together for the rest of their lives or until they sell the company for untold millions of dollars.

They believe that nothing can or will go wrong. They are so sure of each other that they never bother to get a written partnership plan. What could possibly go wrong in this scenario? The short answer is, "A LOT!"

The reality is that, despite dreams of longevity and unwavering trust, business owners' desires and expectations change over time. A written partnership plan can manage these expectations and give each partner confidence in the business's future. A written plan can serve as a safeguard that protects both the business venture and the investment of each partner.

Now, you might be thinking, “How to get an effective partnership plan in place?” The quick answer: Partnership Plan Templates .

Every business requires a partnership plan. Small businesses seek out partnerships more to achieve their goals and objectives. Building a strategic partnership is more complicated than creating a partnership document, but it is the first step toward action. SlideTeam’s partnership plan templates maneuver your ship to the shore.

Let’s explore these!

Template 1: Vendor Strategic Partnership Engagement Plan

Get this Strategic Partnership Plan PPT Template and deliver an impactful presentation to your audience. Its layout is divided into four sections, each describing a critical aspect: Plan, Analyze, Identify, and Act. There’s a specified section for review to ensure you have that extra cushion to make amendments, wherever necessary. Get this template now.

Download this template

Template 2: Strategic Partnerships Event Planning Service Company Profile PPT Template

This PowerPoint Template works wonders when you want to explain the role of strategic partnerships within an organization. It has ample space to highlight points you want to deliver in your presentation. You can use its standard layout to emphasize key details, including partner location, services they monitor, objectives, and more. Download it now.

Template 3: Internal Communication Plan For Partnership Firm

The importance of proper communication in the successful accomplishment of business objectives can’t be overstated. With SlideTeam’s handpicked internal communication plan template, you can enjoy the convenience of an uninterrupted flow of information across departments in your company. This plan layout describes:

• Reasons for communication
• Communication activity
• Communication channel
• Individual responsible

Download now.

Template 4: Marketing Campaign Initiated by Partnership Timeline

Build a weekly timeline for your marketing campaign using this fantastic PPT Template. Till the campaign goes live, you can include and track KPIs to ensure your effort is successful. Here, there are some predefined parameters that you can use: Target mapping exercises, Prepare brands and categories, Assign partner roles, risk register update, Negotiation and recruitment, and Activation and management. Download it now.

Template 5: Global Partnership Management for Planning and Communication

Global partnership management is a painstaking task that can be made easy with our exemplary template. It has a unique framework that explains key insights encompassing the five stages, namely: Prepare, Share Knowledge, Plan, Execute, and Achieve Results. Being 100% editable, you can tweak the design and include points in this template to serve your purpose. Download it now.

Template 6: Six Months Teamwork Partnership Strategy Roadmap

Teamwork is the key to success! We know you would have heard this phrase at least a million times, but it doesn’t take away even a slight bit of truth. Build a six-month teamwork partnership framework using our exceptional PowerPoint Template. It highlights the team member and phases spread across a month-wise timeline. The phases include:

• Develop partnership strategy
• How the partnership will operate
• Ensure stakeholder support
• Resource allocation
• Review the partnership development process

Template 7: Five-yearly Teamwork Partnership Strategy Roadmap

With a similar design to the previous template, this template accelerates the process of building a five-year teamwork partnership strategy roadmap. It has some predefined phases which you can change to suit your business requirements. You can present it to higher management to get their approval on the partnership roadmap you are long working on. Get it now.

Template 8: Planned Partnership Strategy PPT Template

If you need a pre-built framework for drafting a planned partnership strategy, this is the perfect piece for you. Its layout is designed into five stages that you can use to explain critical insights that underline your strategy. You can also use it to highlight KPIs as well. Get it now.

Template 9: Strategic Partnership Showing Teamwork

‘Strategic partnership’ is a complex subject that commands resources to spark clarity in your audience. Lucky for you, SlideTeam has prepared this template that touches every essential parameter that encompasses it. This template highlights the points of collaboration, teamwork, strategy, plan, performance, and success. It is a roadmap with checkpoints you need to surpass to foster better partnerships within your organization. Download it now.

Template 10: Partnership Action Plan PPT Presentation

A partnership action plan boiled down into three stages! Hard to believe, isn’t it? SlideTeam presents a PPT Template that displays a layout that does just that. It has three levels: Action, Planning, and Partnership. The idea behind these stages is, you have to define relevant actions to ensure your organizational plans aren’t affected. Doing so will ensure there’s a more inclusive partnership forging in your company across departments. Get it now.

Partnerships are critical to the success of any business. Merchants and traders have used the principles of strategic partnership to conduct their businesses since the genesis of trade and commerce; the trend continues today.

A partnership can take many forms, from business owners working together to invest in a project to firms sharing technical knowledge and ideas. Whatever a company does, finding the right partnership plan template that benefits both parties is critical. (And that’s why SlideTeam has put together this list of top 10 partnership plan templates!)

FAQs on Partnership Plan

What is a partnership plan.

A partnership plan is a way two or more parties in a business agree on conducting the venture together. Each party takes different functions to perform, helping the business run more efficiently. This plan is documented in the form of an agreement. This document lays down the ground rules on how the partners will handle business responsibilities, ownership and investments, profits and losses, and company management.

While "partners" usually refers to two people, there is no limit to how many partners can form a business partnership in this context.

How do you create a partnership plan?

When forming a business partnership, it is critical to draft a partnership plan contract that outlines all of the terms and conditions of the professional relationship. Your business partnership plan should include a list of all partners and should address the following issues:

• Name of the partnership
• Partnership goals
• Partnership duration
• Contribution amounts of each partner (cash, property, services, future contributions)
• Each partner ownership interest (assets)
• Management roles and terms of authority of each partner
• Accounting obligations
• Distribution of profits and losses between the partners
• Salaries, work hours, sick leaves, and vacation times of each partner
• Permissions and restrictions on any outside business activity
• Buyout options of partners
• Process for adding new partners or removing original partners
• Terms and conditions of termination of the partnership

What are the stages of partnership?

Here are the five stages of partnership:

Stage I. The Singles Stage (Non-Partnering)

Stage II. The Searching Stage (Pre-Partnering)

Stage III. The Courtship Stage (Active Partnering)

Stage IV. The Bonding Stage (Consolidated Partnering)

Stage V. The Commitment Stage (Going to Scale)

What are the 5 principles of partnership?

There are five basic tenets that work together to form a framework for establishing a solid foundation for effective business relationships.

• Shared knowledge
• Agreed Goals
• Balance of return

While some of these are easier to quantify than others, each has a significant impact on the partnership's strength.

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Top 10 Partnership Agreement Templates for Harmonious Synchronization

Top 10 Strategic Partnership Proposal Templates To Form Successful Alliances (Free PDF Attached)

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How To Build a Winning Business Partnership

Darrell Zahorsky is an expert in search engine optimization (SEO) and marketing. He has worked for companies and clients such as Blackberry, ADP, and Subway.

Have the Same Vision

• Define Roles

Choose the Right Structure

Anticipate disputes, spell out financial responsibilities.

• Plan for How to Get Out

Hold Partner Meetings

Revisit the agreement as you grow, the partnership agreement, frequently asked questions. (faqs).

Dan Dalton / Getty Images

Partnerships are a simple way for two or more people to own a business together. There are several types of partnerships that differ in terms of who is liable for debts and lawsuits. You may want to form a partnership to test a business idea before committing to a more formal business structure.

There are quite a few issues you should address with your prospective partner before forming a partnership. Attend to these issues before you start, and you have a better chance of a successful venture.

Key Takeaways

• A partnership is a business structure that involve two or more people who are in business together.
• A successful partnership starts with partners who have the same vision for the business.
• As you create your partnership you should define roles, spell out financial contributions and pay, decide what happens when you have disputes, and discuss what happens when one or all parties want to end the partnership.
• Continue to revisit your partnership agreement as your business grows.

For a partnership to be successful, all parties involved should agree on the same strategic direction for the company. If one partner wants to build a well-known national chain of retail outlets and the other partner only cares about earning a decent living, the business is destined to fail. Set a clear, agreed-upon course for the business that meets the needs of both partners.

Define Business Roles and Responsibilities

A winning business partnership capitalizes on the strengths and skills of each partner. Divide business roles according to each individual's strengths. For example, if one partner is strong in marketing, operations, and finance and the other partner excels in sales, human resources and leadership then split tasks accordingly.

Binding agreement authority is the ability to enter into contracts with other entities. You might consider deciding if any partner has this authority, and in what scope. You and your business partner could split this authority based on the responsibilities you each take on.

If your partner is responsible for procurement, they could enter a contract with a supplier without needing to confer with you. By agreeing who can make these kinds of decisions, you mitigate the risk of conflicts down the road.

The structure you choose for your business will dictate how you and your partner pay taxes for the business. Limited liability companies and general partnerships have different liabilities and tax responsibilities.

Avoid the 50-50 Split

It may seem logical and fair to equally split decision making. However, this kind of split can impair decisions. Instead of a stalemate when you can't come to a compromise, consider developing a way to overcome differences.

If this is not possible, then consider using an outside source to weigh in on big-ticket disagreements. You may not want this source to have final decision ability, but see if they will analyze the situation and give you their opinion for a course of action. If needed, get more than one opinion.

There will be disagreements between partners. Not many pairs of people can agree 100% of the time. You should consider how you are going to handle disputes between each other, with employees, suppliers, customers or any other stakeholders.

One way to deal with this is to include a mandatory arbitration clause in your partnership agreement and the contracts you make with other entities. Arbitration is the use of an outside party to determine the outcome of disagreements and disputes.

Arbitration is a legally recognized method of dispute resolution. Binding arbitration means that all parties involved agree to abide by the decision of the arbitrator.

You should decide with your partner how much each of you is going to contribute to setting up your business or partnership. If you are both already operating, the costs may not be as high as if you both needed to start out.

Everyone has their own limit for tolerating risk. Financial risk can be more stressful than physical risk because it affects much more than your own safety. You should discuss with your partner how much financial risk you both can tolerate, and set limits.

An example of risk could be the method that you choose to finance your business. There is generally more risk involved with debt financing than with equity financing (using loans to finance instead of issuing shares, venture capitalists, etc.).

You may not have much of a choice at first how you finance your business, but be sure all parties understand the risks, and how much each person is responsible for.

The type of business you put together will also dictate the risk that you assume. Creating a limited liability company keeps owners from personal responsibility for the debts of a failed business.

When you create your partnership, you should discuss the expectations for pay.

Most businesses do not generate profit within the first year or even the second year . The number one reason new businesses fail is that they don't have enough cash to pay the business' and owner's bills. Ensure you and your business partner know how you are going to make ends meet.

Generally, in a partnership, the assets belong to the business unless specified in the partnership agreement. Partners will then own a percentage of the value of the company property based on the agreement. This is usually only a concern for businesses when they are closing out, and owners are working through who gets what.

Plan for Buy-Outs, Dissolutions, and Exits

Partnerships dissolve for many reasons. One partner may decide the partnership is no longer beneficial. You should include buy-out terms in case one partner wants to leave.

You might consider adding a dissolution clause to the partnership agreement. If the partnership is not working out, it would be beneficial to have pre-agreed terms for splitting things up.

An exit strategy is a plan if both partners should want out. This is can be accomplished by selling the company, or by selling all the inventory, assets, and interests a business has.

A strong business partnership is built on open communication. Meet on a regular basis so you can share grievances, review roles, provide constructive criticism, and discuss future plans for the growth or direction of your business.

Your business may grow over time as you and your partner work together. You may want to readdress your partnership agreement as your business grows. You may need to add more partners, include senior employees, and include expansion agreements.

You could include this in your initial agreement, but it might be better to wait until you are in a position to consider growth and expansion.

It is simple to set up a partnership because there are no legal documents to file. A written agreement, signed by all partners, is a legal document recognized by law.

Partnerships are often an oral agreement between two or more parties. Oral agreements can present problems in case of disagreements, even though they are legally binding. Instead, avoid potential problems by drawing up a partnership agreement.

Your partnership agreement should include the following (at a minimum):

• Amount of equity invested by each partner
• The type of business
• How profits and loss will be shared
• Decision-making policies
• Partners' pay and other compensation such as bonuses
• Distribution of assets upon dissolution of the business
• Provisions for changes to the partnership or provisions for dissolving the partnership
• Parameters of a dispute settlement clause
• Settlement of the business in case of death or incapacitation
• Restrictions regarding authority and expenditures
• Expected length of the partnership

It's always worth considering a business partnership structure when you find someone who complements your skill set and you know will add value to your company. These partnerships can be enjoyable and lucrative if the right foundation is cemented in the beginning.

What kinds of business partnerships are there?

There are three types of partnerships. A general partnership (GP) involves partners who all have liability for debts and lawsuits. In a limited partnership (LP), one or more general partners manage the business and have liability, while other partners don't participate in the operations and don't have liability. Finally, in a limited liability partnership (LLP), all partners have limited liability.

What's the difference between a partnership and an LLC?

A limited liability company (LLC) with two or more members (owners) is treated as a partnership for income tax purposes. The main  difference between an LLC and a partnership  is that in an LLC, members don't hold personal liability for the company. In many partnerships, only limited partners are protected from personal liability for the company.

Small Business Administration. " Choose a Business Structure ."

Cornell Law School Legal Information Institute. " Alternative Dispute Resolution ."

Small Business Administration Office of Advocacy. " Small Business Facts ."

Internal Revenue Service. " Limited Liability Company (LLC) ."

Improving the management of complex business partnerships

Partnerships never go out of style. Companies regularly seek partners with complementary capabilities to gain access to new markets and channels, share intellectual property or infrastructure, or reduce risk. The more complex the business environment becomes—for instance, as new technologies emerge or as innovation cycles get faster—the more such relationships make sense. And the better companies get at managing individual relationships, the more likely it is that they will become “partners of choice” and able to build entire portfolios of practical and value-creating partnerships.

Of course, the perennial problems associated with managing business partnerships don’t go away either—particularly as companies increasingly strike relationships with partners in different sectors and geographies. The last time we polled executives on their perceived risks for strategic partnerships, 1 Observations collected in McKinsey’s 2015 survey of more than 1,250 executives. Sixty-eight percent said they expect their organizations to increase the number of joint ventures or large partnerships they participate in over the next five years. A separate, follow-up survey in 2018 showed that 73 percent of participants expect their companies to increase the number of large partnerships they engage in. the main ones were: partners’ disagreements on the central objectives for the relationship, poor communication practices among partners, poor governance processes, and, when market or other circumstances change, partners’ inability to identify and quickly make the changes needed for the relationship to succeed (exhibit).

In our work helping executive teams set up and navigate complex partnerships, we have witnessed firsthand how these problems crop up, and we have observed the different ways companies deal with them . The reality is: successful partnerships don’t just happen. Strong partners set a clear foundation for business relationships and nurture them. They emphasize accountability within and across partner companies, and they use metrics to gauge success. And they are willing to change things up if needed. Focusing on these priorities can help partnerships thrive and create more value than they would otherwise.

Establish a clear foundation

It seems obvious that partner companies would strive to find common ground from the start—particularly in the case of large joint ventures in which each side has a big financial stake, or in partnerships in which there are extreme differences in cultures, communications, and expectations.

Yet, in a rush to complete the deal, discussions about common goals often get overlooked. This is especially true in strategic alliances within an industry, where everyone assumes that because they are operating in the same sector they are already on the same page. By skipping this step, companies increase the stress and tension placed on the partnership and reduce the odds of its success. For instance, the day-to-day operators end up receiving confusing guidance or conflicting priorities from partner organizations.

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How can the partners combat it? The individuals expected to lead day-to-day operations of the partnership, whether business-unit executives or alliance managers, should be part of negotiations at the outset. This happens less often than you think because business-development teams and lawyers are typically charged with hammering out the terms of the deal—the objectives, scope, and governance structure—while the operations piece often gets sorted out after the fact.

Transparency during negotiations is the only way to ensure that everyone understands the partners’ goals (whether their primary focus is on improving operations or launching a new strategy) and that everyone is using the same measures of success. Even more important, transparency encourages trust and collaboration among partners, which is especially important when you consider the number of executives across the organizations who will likely rotate in and out of leadership roles during the life of the relationship.

Inevitably, points of tension will emerge. For instance, companies often disagree on financial flows or decision rights. But we have seen partners articulate such differences during the negotiation period, find agreement on priorities, and reset timelines and milestones. They defused much of the tension up front, so when new wrinkles—such as market shifts and changes in partners’ strategies—did emerge, the companies were more easily able to avoid costly setbacks and delays in the business activities they were pursuing together.

Nurture the relationship

Even business relationships that start off solidly can erode, given individual biases and common communication and collaboration issues. There are several measures partners can take to avoid these traps.

Connect socially

If executives in the partner organizations actively look for opportunities to understand one another, good collaboration and communication at the operations level are likely to follow. Given time and geographic constraints, it can be hard for them to do so, but as one energy-sector executive who has negotiated and managed dozens of partnerships noted, “It’s important to spend as much time as you can on their turf.” He says about 30 to 40 percent of partnership meetings are about business; the rest of the time is spent building friendships and trust.

Keep everyone in the loop

Skipping the step of keeping everyone informed can create unnecessary confusion and rework for partner organizations. That is what happened in the case of an industrial joint venture: the first partner in the joint venture included a key business-unit leader in all venture-related discussions. The second partner apprised a key business-unit leader about major developments, but this individual did not actually join the discussions until late in the joint-venture negotiation. At that point, as he learned more about the agreement, he flagged several issues, including inconsistencies in the partners’ access to vendors and related data. He immediately recognized these issues because they directly affected operations in his division. Because he hadn’t been included in early discussions, however, the partners wasted time designing an operating model for the joint venture that would likely not work for one of them. They had to go back to the drawing board.

Recognize each other’s capabilities, cultures, and motivations

Partners come together to take advantage of complementary geographies, corresponding sales and marketing strengths, or compatibilities in other functional areas. But it is important to understand which partner is best at what . This process must start before the deal is completed—but cannot stop at signing. In the case of one consumer-goods joint venture, for instance, the two partner organizations felt confident in their plan to combine the manufacturing strength of one company with the sales and marketing strengths of the other. During their discussions on how to handle financial reporting, however, it became clear that the partner with sales and marketing strengths had a spike in forecasting, budgeting, and reporting expertise. The product team for the first partner had originally expected to manage these finance tasks, but both partner teams ultimately agreed that the second partner should take them on. In this way, they were able to enhance the joint venture’s ongoing operations and ensure its viability.

Equally important is understanding each partner’s motivation behind the deal. This is a common point of focus during early negotiations; it should continue to be discussed as part of day-to-day operations—particularly if there are secondary motivators, such as access to suppliers or transfer of capabilities, that are important to each partner. Within one energy-sector partnership, for instance, the nonoperating partner was keen to understand how its local workforce would receive training over the course of the partnership. This company wanted to enhance the skills of the local workforce to create more opportunities for long-term employment in the region. The operating partner incorporated training and skill-evaluation metrics in the venture’s quarterly updates, thus improving the companies’ communication on the topic and explicitly acknowledging the importance of this point to its partner.

Invest in tools, processes, and personnel

Bringing different business cultures together can be challenging, given partners’ varying communication styles and expectations. The good news is that there are a range of tools—among them, financial models, key performance indicators, playbooks, and portfolio reviews—companies can use to help bridge any gaps. And not all these interventions are technology dependent. Some companies simply standardize the format of partnership meetings and agendas so that teams know what to expect. Others follow stringent reporting requirements.

Another good move is to convene an alliance-management team. This group tracks and reviews the partnership’s progress against defined metrics and helps to spot potential areas of concern—ideally with enough time to change course. Such teams take different forms. One pharmaceutical company with dozens of commercial and research partnerships has a nine-member alliance-management team charged mostly with monitoring and flagging potential issues for business-unit leaders, so it consists of primarily junior members and one senior leader who interacts directly with partners. An energy company with four large-scale joint ventures has taken a different approach: its alliance-management team comprises four people, but each is an experienced business leader who can serve as a resource for the respective joint-venture-leadership teams.

Sometimes partnerships need a structural shake-up—and not just as an act of last resort.

How companies structure these teams depends on concrete factors—the number and complexity of the partnerships, for instance—as well as intangibles like executive support for alliances and joint ventures and the experiences and capabilities of the individuals who would make up the alliance-management team.

Emphasize accountability and metrics

Good governance is the linchpin for successful partnerships; as such, it is critical that senior executives from the partner organizations remain involved in oversight of the partnership. At the very least, each partner should assign a senior line executive from the company to be “deal sponsor”—someone who can keep operations leaders and alliance managers focused on priorities, advocate for resources when needed, and generally create an environment in which everyone can act with more confidence and coordination.

Additionally, the partners must define “success” for their operations teams: What metrics will they use to determine whether they have hit their goals, and how will they track them? Some companies have built responsibility matrices; others have used detailed process maps or project stage gates to clarify expectations, timelines, and critical performance measures. When partnerships are initially formed, it is usually the business-development teams that are responsible for building the case for the deal and identifying the value that may be created for both sides. As the partnership evolves, the operations teams must take over this task, but they will need ongoing guidance from senior leaders in the partner organizations.

Build a dynamic partnership

Sometimes partnerships need a structural shake-up—and not just as an act of last resort. For instance, it might be less critical to revisit the structure of a partnership in which both sides are focused on joint commercialization of complementary products than it would be for a partnership focused on the joint development of a set of new technologies. But there are some basic rules of thumb for considering changes in partnership structure.

Partner organizations must acknowledge that the scope of the relationship is likely to shift over time. This will be the case whether the partners are in a single- or multiasset venture, expect that services will be shared, anticipate expansion, or have any geographic, regulatory, or structural complexities. Accepting the inevitable will encourage partners to plan more carefully at the outset. For example, during negotiations, the partners in a pharmaceutical partnership determined that they had different views on future demand for drugs in development. This wasn’t a deal breaker, however. Instead, the partners designated a formula by which financial flows would be evaluated at specific intervals to address any changes in expected performance. This allowed the partners to adjust the partnership based on changes in market demand or the emergence of new products. All changes could be incorporated fairly into the financial splits of the partnership.

Avoiding blind spots in your next joint venture

Partners should also consider the potential for restructuring during the negotiation process—ideally framing the potential endgame for the relationship. What market shifts might occur, how might that affect both sides’ interests and incentives, and what mechanisms would allow for orderly restructuring? When one oil and gas joint venture began struggling, the joint-venture leader realized he was being pulled in opposing directions by the two partner companies because of the companies’ conflicting incentives. “It made the alliance completely unstable,” he told us. He brought the partners back to the negotiation table to determine how to reconcile these conflicting incentives, restructure their agreement, and continue the relationship, thus avoiding deep resentment and frustration on both sides of the deal.

Such dialogues about the partnership’s future, while potentially stressful, should be conducted regularly—at least annually.

The implementation of these four principles requires some forethought and care. Every relationship comes with its own idiosyncrasies, after all, depending on industry, geography, previous experience, and strategy. Managing relationships outside of developed markets, for instance, can present additional challenges involving local cultures, integration norms, and regulatory complexities. Even in these emerging-market deals, however, the principles can serve as effective prerequisites for initiating discussions about how to change long-standing practices and mind-sets.

An emphasis on clarity, proactive management, accountability, and agility can not only extend the life span of a partnership or joint venture but also help companies build the capability to establish more of them—and, in the process, create outsize value and productivity in their organizations.

Ruth De Backer is a partner in McKinsey’s New York office, where Eileen Kelly Rinaudo is a senior expert.

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Costa Rica, UAE Sign Economic Partnership Agreement

Costa Rica and the United Arab Emirates signed an Economic Partnership Agreement on Trade and Investment. The Minister of Foreign Trade of Costa Rica, Manuel Tovar Rivera, and the Minister of Foreign Trade of the United Arab Emirates, Dr. Thani bin Ahmed Al Zeyoudi, represented their respective nations.

The UAE Minister of Foreign Trade arrived in the country on Monday afternoon with a delegation of 28 representatives from both the public and private sectors, including tourism, finance, and infrastructure.

The Agreement aims to stimulate foreign direct investment, boost bilateral trade, and establish Costa Rica as the United Arab Emirates’ gateway to the Latin American region.

During their visit, the UAE delegation held meetings with Costa Rica’s Minister of Foreign Trade, representatives from the Foreign Trade Promotion Agency ( PROCOMER ) and engaged in a business roundtable with Costa Rican counterparts to explore commercial opportunities.

“Costa Rica has embraced trade openness, charting a clear path towards greater diversification and integration into the global economy,” said Minister Tovar.

He also highlighted that once the treaty comes into force, it could strengthen Costa Rica’s global value chain participation and position it as a preferred partner for agricultural and food products in a high-purchasing-power economy. Dr. Thani bin Ahmed Al Zeyoudi expressed enthusiasm for the potential opportunities opening up for both countries.

“Our agreement with Costa Rica is set to usher in a productive new era of economic collaboration between our nations. Costa Rica is one of the region’s most impressive growth stories, with a diversified, service-driven economy that has gained recognition for its commitment to sustainability and innovation,” he said.

According to the UAE representative, Costa Rica is one of the most investment-friendly economies in Latin America. He also mentioned that this deal will promote greater investment, collaboration, and knowledge sharing in high-priority sectors such as tourism, renewable energy, food security, information technology, and manufacturing.

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United   States-Japan Joint Leaders’   Statement

Global Partners for the Future

Over the course of the last three years, the U.S.-Japan Alliance has reached unprecedented heights. We arrived at this historic moment because our nations, individually and together, took courageous steps to strengthen our collective capacity in ways that would have seemed impossible just a few years ago. Today, we, President Joseph R. Biden, Jr. and Prime Minister KISHIDA Fumio, celebrate this new era of U.S.-Japan strategic cooperation during the Prime Minister’s Official Visit and State Dinner in Washington, D.C.—and pledge that the United States and Japan will continue our tireless work, together and with other partners, to realize a free and open Indo-Pacific and world.

In this new era of U.S.-Japan cooperation, we recognize that global events affect the security and stability of the Indo-Pacific, and that developments in our shared region reverberate around the world. We are therefore working together, across all domains and at all levels, to build a global partnership that is fit for purpose to address the complex, interconnected challenges of today and tomorrow for the benefit of our two countries and the world. As our Alliance cooperation reaches new heights, we are expanding our engagement to reflect the global nature of our partnership.

At the core of our cooperation is a shared commitment to work with like-minded partners and multilateral institutions to address common challenges and to ensure a world that is free, open, connected, resilient, and secure. These joint efforts are based on our shared fundamental respect for international law, including the protection and promotion of human rights and dignity, the sovereignty and territorial integrity of all states, and the prohibition on acquisition of territory by force. Our purpose as partners is to uphold and bolster the free and open international order based on the rule of law that has allowed so many nations to develop and prosper, and to ensure our Alliance is equipped to tackle the challenges of the 21 st century.

To advance our global partnership, today we announce several new strategic initiatives to strengthen our defense and security cooperation; reach new frontiers in space; drive technology innovation; bolster economic security; accelerate climate action; partner on global diplomacy and development; and fortify the ties between our peoples. Through our global partnership, we are also synchronizing our strategies, and our two nations have never been more united as we work together to address the most pressing challenges and opportunities of the future.

Strengthening our Defense and Security Cooperation

The core of our global partnership is our bilateral defense and security cooperation under the Treaty of Mutual Cooperation and Security, which is stronger than ever. We affirm that our Alliance remains the cornerstone of peace, security, and prosperity in the Indo-Pacific. President Biden reiterated the unwavering commitment of the United States to the defense of Japan under Article V of the Treaty, using its full range of capabilities, including nuclear capabilities. Prime Minister Kishida reaffirmed Japan’s unwavering commitment to fundamentally reinforce its own defense capabilities and roles, and to enhance its close coordination with the United States under the Treaty.President Biden also reaffirmed that Article V applies to the Senkaku Islands. We reiterated our strong opposition to any attempts by the People’s Republic of China (PRC) to unilaterally change the status quo by force or coercion in the East China Sea, including through actions that seek to undermine Japan’s longstanding and peaceful administration of the Senkaku Islands. We welcome the progress in optimizing Alliance force posture in areas including the Southwestern Islands to strengthen U.S.-Japan deterrence and response capabilities, and we confirm the importance of further advancing this initiative.

The United States welcomes the steps Japan is taking to fundamentally enhance its defense capabilities, including its plans to increase the budget for its defense capabilities and complementary initiatives to two percent of GDP in Japanese Fiscal Year (JFY) 2027 in accordance with Japan’s National Security Strategy, its decision to possess counterstrike capabilities, and its plans to stand up the Japan Self-Defense Forces (JSDF) Joint Operations Command to enhance command and control of the JSDF. Together, these initiatives elevate our defense ties to unprecedented levels and launch a new era of U.S.-Japan security cooperation, strengthening our Alliance and contributing to stability in the Indo-Pacific.

Today, we announce several new strategic initiatives to further advance our Alliance. Recognizing the speed at which regional security challenges evolve and to ensure our bilateral Alliance structures meet these critical changes, we announce our intention to bilaterally upgrade our respective command and control frameworks to enable seamless integration of operations and capabilities and allow for greater interoperability and planning between U.S. and Japanese forces in peacetime and during contingencies. More effective U.S.-Japan Alliance command and control will strengthen deterrence and promote a free and open Indo-Pacific in the face of pressing regional security challenges. We call on our respective defense and foreign ministries to develop this new relationship through the Security Consultative Committee (our security “2+2”). In support of this vision, we also reaffirm our goal to deepen Intelligence, Surveillance, and Reconnaissance cooperation and Alliance information sharing capabilities, including through the Bilateral Information Analysis Cell.

We will also continue to implement efforts to strengthen our Alliance force posture, build high-end base capabilities, and increase preparedness that are necessary to deter and defend against threats. We resolve to deepen bilateral cooperation toward the effective development and employment of Japan’s suite of counterstrike capabilities, including the provision of U.S. materiel and technological support to enhance Japan’s indigenous stand-off programs. The United States expressed its commitment to start the training pipeline and ship modifications for Japan to acquire operational capability of the Tomahawk Land Attack Missile (TLAM) system. We also reaffirmed our pursuit of a Glide Phase Interceptor (GPI) cooperative development program to counter high-end, regional hypersonic threats.

As our countries strengthen our bilateral ties, we will continue to build our relationships with like-minded partners in the region. Today, we announce our vision to cooperate on a networked air defense architecture among the United States, Japan, and Australia to counter growing air and missile threats. Recognizing Japan’s strengths and the close bilateral defense partnerships with the AUKUS countries, AUKUS partners – Australia, the United Kingdom, and the United States – are considering cooperation with Japan on AUKUS Pillar II advanced capability projects. Continuing the momentum from the Camp David Summit, we welcome progress on establishing an annual multidomain exercise between the United States, Japan, and the Republic of Korea (ROK). Recognizing the commitments made in the Atlantic Declaration and the Hiroshima Accord, and as the Indo-Pacific and Euro-Atlantic regions become ever more interlinked, we welcome the announcement of regular U.S.-Japan-UK trilateral exercises, beginning in 2025, as we enhance our shared and enduring security. Building on the announcement at the Australia Official Visit in October to pursue trilateral cooperation with Japan on unmanned aerial systems, we are exploring cooperative opportunities in the rapidly emerging field of collaborative combat aircraft and autonomy.

The United States welcomes Japan’s revision of the Three Principles on the Transfer of Defense Equipment and Technology and its Implementation Guidelines, which bolsters cooperation through joint development and production to enhance our deterrence capabilities in the region. To leverage our respective industrial bases to meet the demand for critical capabilities and maintain readiness over the long term, we will convene a Forum on Defense Industrial Cooperation, Acquisition and Sustainment (DICAS) co-led by the U.S. Department of Defense and Japan’s Ministry of Defense to identify priority areas for partnering U.S. and Japanese industry, including co-development and co-production of missiles and co-sustainment of forward-deployed U.S. Navy ships and U.S. Air Force aircraft, including fourth generation fighters, at Japanese commercial facilities, in coordination with relevant ministries. This forum, in conjunction with our existing Defense Science and Technology Cooperation Group, will better integrate and align our defense industrial policy, acquisition, and science and technology ecosystems. The DICAS will provide updates on progress to the foreign and defense ministers in the security “2+2.” We also commit to establishing a working group to explore opportunities for future fighter pilot training and readiness, including AI and advanced simulators, and co-development and co-production of cutting-edge technologies such as common jet trainers to maintain combat-ready next-generation fighter airpower.

We reaffirm the critical importance of continuing to enhance U.S. extended deterrence, bolstered by Japan’s defense capabilities, and will further strengthen bilateral cooperation. In this regard, we call on our respective foreign and defense ministers to hold in-depth discussions on extended deterrence on the occasion of the next security “2+2” meeting.

We continue to deepen our cooperation on information and cyber security to ensure that our Alliance stays ahead of growing cyber threats and builds resilience in the information and communication technology domain. We also plan on enhancing our cooperation on the protection of critical infrastructure.

Recognizing the importance of rapidly responding to frequent and severe climate change-related and other natural disasters, we plan to explore cooperation on the establishment of a humanitarian assistance and disaster relief hub in Japan.

In order to maintain deterrence and mitigate impact on local communities, we are firmly committed to the steady implementation of the realignment of U.S. forces in Japan in accordance with Okinawa Consolidation Plan, including the construction of the Futenma Replacement Facility at Henoko as the only solution that avoids the continued use of Marine Corps Air Station Futenma.

Reaching New Frontiers in Space

Our global partnership extends to space, where the United States and Japan are leading the way to explore our solar system and return to the Moon. Today, we welcome the signing of a Lunar Surface Exploration Implementing Arrangement, in which Japan plans to provide and sustain operation of a pressurized lunar rover while the United States plans to allocate two astronaut flight opportunities to the lunar surface for Japan on future Artemis missions. The leaders announced a shared goal for a Japanese national to be the first non-American astronaut to land on the Moon on a future Artemis mission, assuming important benchmarks are achieved. The United States and Japan plan to deepen cooperation on astronaut training to facilitate this goal while managing the risks of these challenging and inspiring lunar surface missions. We also announce bilateral collaboration on a Low Earth Orbit detection and tracking constellation for missiles such as hypersonic glide vehicles, including potential collaboration with U.S. industry.

Leading on Innovation , Economic Security, and Climate Action

The United States and Japan aim to maximally align our economic, technology, and related strategies to advance innovation, strengthen our industrial bases, promote resilient and reliable supply chains, and build the strategic emerging industries of the future while pursuing deep emissions reductions this decade. Building on our efforts in the U.S.-Japan Competitiveness and Resilience (CoRe) Partnership, including through the U.S.-Japan Economic Policy Consultative Committee (our economic “2+2”), we intend to sharpen our innovative edge and strengthen our economic security, including by promoting and protecting critical and emerging technologies.

The United States and Japan welcome our robust economic and commercial ties through mutual investment, including Microsoft’s $2.9 billion investment in Japan on AI and cloud infrastructure, workforce training, and a research lab; and Toyota’s recent additional $8 billion battery production investment for a cumulative $13.9 billion investment in North Carolina. Japan is the top foreign investor in the United States with nearly $800 billion in foreign direct investment, and Japanese companies employ nearly 1 million Americans across all 50 states. Similarly, as a top foreign investor in Japan for many years, the United States is supporting Japan’s economic growth, and as two of the world’s largest financial sectors, we commit to strengthening our partnership to bolster cross-border investment and support financial stability. As robust and creative economies, we also plan to accelerate investment in our respective start-up environments to foster innovation through the “Japan Innovation Campus” in Silicon Valley and the “Global Startup Campus” to be established in Tokyo, and in companies that take actions toward sustainable value creation (SX). We welcome our new Japan-U.S. personnel exchange programs on startups and venture capital firms under the Global Innovation through Science and Technology (GIST) initiative.

We are committed to strengthening our shared role as global leaders in the development and protection of next-generation critical and emerging technologies such as AI, quantum technology, semiconductors, and biotechnology through research exchange and private investment and capital finance, including with other like-minded partners. We welcome our collaboration on AI for Science between Riken and Argonne National Laboratory (ANL) founded on the revised project arrangement.

We applaud the establishment of $110 million in new AI research partnerships – between the University of Washington and University of Tsukuba and between Carnegie Mellon University and Keio University – through funding from NVIDIA, Arm, Amazon, Microsoft, and a consortium of Japanese companies. We are committed to further advancing the Hiroshima AI Process and strengthening collaboration between the national AI Safety Institutes.

Building on our long history of semiconductor cooperation, we intend to establish a joint technology agenda for cooperation on issues such as research and development, design, and workforce development. We also welcome the robust cooperation between and with our private sectors, especially in next-generation semiconductors and advanced packaging. We also plan to work together along with like-minded countries to strengthen global semiconductor supply chains, particularly for mature node (“legacy”) semiconductors through information-sharing, coordination of policies, and addressing vulnerabilities stemming from non-market policies and practices. We also celebrate the signing of a Memorandum of Cooperation between Japan’s National Institute of Advanced Industrial Science and Technology (AIST) and the U.S. National Institute of Standards and Technology (NIST) as a first step in bilateral cooperation on quantum computing.

Building on the Indo-Pacific Economic Framework for Prosperity (IPEF) and our respective leadership of the G7 and Asia-Pacific Economic Cooperation (APEC) last year, we continue to advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness for our economies . We applaud the recent entry into force of the IPEF Supply Chain Agreement. We will continue to seek cooperation on critical minerals projects, including those along the Partnership for Global Infrastructure and Investment Lobito Corridor, and through the Minerals Security Partnership (MSP) as well as the Partnership for Resilient and Inclusive Supply-chain Enhancement (RISE). We are cooperating to deter and address economic coercion, through our bilateral cooperation as well as through our work with like-minded partners including the G7 Coordination Platform on Economic Coercion. We are working to uphold a free, fair and rules-based economic order; address non-market policies and practices; build trusted, resilient, and sustainable supply chains; and promote open markets and fair competition under the U.S.-Japan economic “2+2” and the U.S.-Japan Commercial and Industrial Partnership. We will advance our commitment to operationalize data free flow with trust, including with respect to data security. We will also discuss the promotion of resilient and responsible seafood supply chains.

The United States and Japan recognize that the climate crisis is the existential challenge of our time and intend to be leaders in the global response. Towards our shared goal of accelerating the clean energy transition, we are launching a new high-level dialogue on how we implement our respective domestic measures and maximize their synergies and impacts, including the U.S. Inflation Reduction Act and Japan’s Green Transformation (GX) Promotion Strategy aimed at accelerating energy transition progress this decade, promoting complementary and innovative clean energy supply chains and improving industrial competitiveness. Today we announce Japan joins as the first international collaborator of the U.S. Floating Offshore Wind Shot. We intend to work together towards global ambition in line with the Wind Shot, taking into consideration national circumstances, through the Clean Energy and Energy Security Initiative (CEESI) to pursue innovative breakthroughs that drive down technology costs, accelerate decarbonization, and deliver benefits for coastal communities. The United States welcomes Japan’s newly-launched industry platform, the Floating Offshore Wind Technology Research Association (FLOWRA), aiming to reduce costs and achieve mass production of floating offshore wind through collaboration with academia.

We are further leading the way in developing and deploying next generation clean energy technology, including fusion energy development through the announcement of a U.S.-Japan Strategic Partnership to Accelerate Fusion Energy Demonstration and Commercialization.

The United States remains unwavering in its commitment to support the energy security of Japan and other allies, including its ability to predictably supply LNG while accelerating the global transition to zero-emissions energy and working with other fossil energy importers and producers to minimize methane emissions across the fossil energy value chain to the fullest extent practicable.

We intend to advance widespread adoption of innovative new clean energy technologies, and seek to increase the globally available supply of sustainable aviation fuel or feedstock, including those that are ethanol-based, that show promise in reducing emissions.

We are also working to align global health security and innovation, including in such areas as pandemic prevention, preparedness, and response and promoting more resilient, equitable, and sustainable health systems. Today, we announce that the U.S. Food and Drug Administration and the Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) intend to collaborate and exchange information on oncology drug products to help cancer patients receive earlier access to medications and to discuss future drug development and ways to prevent drug shortages. We welcome PMDA’s future representative office in Washington, D.C., to facilitate this cooperation.

Partnering on Global Diplomacy and Development

The challenges we face transcend geography. The United States and Japan are steadfast in our commitment to upholding international law, including the UN Charter, and call for all Member States to uphold the Charter’s purposes and principles, including refraining from the threat or use of force against the territorial integrity or political independence of any State. We remain committed to reforming the UN Security Council (UNSC), including through expansion in permanent and non-permanent categories of its membership. President Biden reiterated support for Japan’s permanent membership on a reformed UNSC.

We reaffirm our commitment made in Hiroshima last year and are determined to further promote our cooperation in the G7 and work together with partners beyond the G7.

We emphasize the importance of all parties promoting open channels of communication and practical measures to reduce the risk of misunderstanding and miscalculation and to prevent conflict in the Indo-Pacific. In particular, we underscore the importance of candid communication with the PRC, including at the leader level, and express the intent to work with the PRC where possible on areas of common interest.

We emphasize the importance of all States being able to exercise rights and freedoms in a manner consistent with international law as reflected in the United Nations Convention on the Law of the Sea (UNCLOS), including freedom of navigation and overflight. We strongly oppose any unilateral attempts to change the status quo by force or coercion, including destabilizing actions in the South China Sea, such as unsafe encounters at sea and in the air as well as the militarization of disputed features and the dangerous use of coast guard vessels and maritime militia. The PRC’s recent dangerous and escalatory behavior supporting its unlawful maritime claims in the South China Sea as well as efforts to disrupt other countries’ offshore resource exploitation are inconsistent with international law as reflected in UNCLOS. We also emphasize that the 2016 South China Sea Arbitral Award is final and legally binding on the parties to that proceeding. We resolve to work with partners, particularly in ASEAN, to support regional maritime security and uphold international law.

We emphasize that our basic positions on Taiwan remain unchanged and reiterate the importance of maintaining peace and stability across the Taiwan Strait as an indispensable element of global security and prosperity. We encourage the peaceful resolution of cross-Strait issues.

We continue working together with partner countries to make concrete progress in strengthening the international financial architecture and fostering investment under the Partnership for Global Infrastructure and Investment. We are committed to delivering better, bigger, more effective multilateral development banks including through our planned contributions that would enable more than $30 billion in new World Bank lending and securing ambitious International Development Association and Asian Development Fund replenishments. We also emphasize the importance of private sector investment in the Indo-Pacific. We welcome the announcement of Google’s $1 billion investment in digital connectivity for North Pacific Connect, which expands the Pacific Connect Initiative, with NEC, to improve digital communications infrastructure between the United States, Japan and Pacific Island Nations. Building on the U.S.-Australia joint funding commitment for subsea cables last October, the United States and Japan plan to collaborate with like-minded partners to build trusted and more resilient networks and intend to contribute funds to provide subsea cables in the Pacific region, including $16 million towards cable systems for the Federated States of Micronesia and Tuvalu.

We reaffirm our steadfast commitment to the Quad and its shared vision of a free and open Indo-Pacific that is stable, prosperous, and inclusive which continues to deliver results for the region. We reiterate the Quad’s unwavering support and respect for regional institutions, including ASEAN, the Pacific Islands Forum (PIF), and the Indian Ocean Rim Association. We also reaffirm our support for ASEAN centrality and unity as well as the ASEAN Outlook on the Indo-Pacific. Southeast Asian countries are critical partners in the Indo-Pacific and the U.S.-Japan-Philippines trilateral aims to enhance trilateral defense and security cooperation while promoting economic security and resilience. Japan and the United States reaffirmed our intention to work to support the region’s priorities as articulated through the 2050 Strategy for the Blue Pacific Continent, including through the PIF as the Pacific’s preeminent institution as well as through the Partners in the Blue Pacific (PBP).

As we pursue our shared vision of a free and open Indo-Pacific, we continue to build strong ties between key, like-minded partners in the region. Building on the historic success of the Camp David Trilateral Summit, the United States, Japan and the Republic of Korea continue to collaborate on promoting regional security, strengthening deterrence, coordinating development and humanitarian assistance, countering North Korea’s illicit cyber activities, and deepening our cooperation including on economic, clean energy, and technological issues. The United States and Japan also remain committed to advancing trilateral cooperation with Australia to ensure a peaceful and stable region.

We reaffirm our commitment to the complete denuclearization of North Korea in accordance with relevant UNSC resolutions. We strongly condemn North Korea’s continued development of its ballistic missile program—including through launches of intercontinental ballistic missiles (ICBM) and space launch vehicles using ballistic missile technologies—which poses a grave threat to peace and security on the Korean Peninsula and beyond. We call on North Korea to respond to continued, genuine offers to return to diplomacy without preconditions. We call on all UN Member States to fully implement all relevant UNSC resolutions, especially in light of Russia’s recent veto. We urge North Korea to cease illicit activities that generate revenue for its unlawful ballistic missile and weapons of mass destruction programs, including malicious cyber activities. President Biden also reaffirms U.S. commitment to the immediate resolution of the abductions issue, and the two sides commit to continuing joint efforts to promote respect for human rights in North Korea.

We continue to stand together in firm opposition to Russia’s brutal war of aggression against Ukraine, its strikes against Ukraine’s infrastructure and the terror of Russian occupation. We are committed to continuing to impose severe sanctions on Russia and provide unwavering support for Ukraine. Together, we reiterate our call on Russia to immediately, completely, and unconditionally withdraw its forces from within the internationally recognized borders of Ukraine. Any threat or use of nuclear weapons in the context of its war of aggression against Ukraine by Russia is unacceptable. We also express serious concerns about growing North Korea-Russia military cooperation, which is supporting Russia’s war of aggression against Ukraine and threatens to undermine peace and stability in Northeast Asia as well as the global non-proliferation regime.

As the linkages between the Euro-Atlantic and the Indo-Pacific regions have become stronger than ever, our two countries look forward to continuing to work together to enhance Japan-North Atlantic Treaty Organization (NATO) and NATO-Indo-Pacific Four partnerships.

We once again unequivocally condemn the terror attacks by Hamas and others on October 7 of last year, and reaffirm Israel’s right to defend itself and its people consistent with international law. At the same time, we express our deep concern over the critical humanitarian situation in the Gaza Strip. We affirm the imperative of securing the release of all hostages held by Hamas, and emphasize that the deal to release hostages would bring an immediate and prolonged ceasefire in Gaza. We affirm the imperative of realizing an immediate and sustained ceasefire in Gaza over a period of at least six weeks as part of a deal that would release hostages held by Hamas and allow for delivery of essential additional humanitarian assistance to Palestinians in need. We underscore the urgent need to significantly increase deliveries of life-saving humanitarian assistance throughout Gaza and the crucial need to prevent regional escalation. We reiterate the importance of complying with international law, including international humanitarian law, as applicable, including with regard to the protection of civilians. We remain committed to an independent Palestinian state with Israel’s security guaranteed as part of a two-state solution that enables both Israelis and Palestinians to live in a just, lasting, and secure peace.

We reaffirm the importance of supporting inclusive growth and sustainable development in Latin America and the Caribbean. We continue to enhance policy coordination in the region, in particular on Haiti and Venezuela. We also recognize that promoting the stability and security for Haiti is one of the most pressing challenges in the Western Hemisphere, and we continue to support Haiti in restoring democratic order.

We also support African aspirations for peace, stability, and prosperity based on the rule of law. We continue to work together to support the democratic process and economic growth through our respective efforts, including our cooperation with African countries, Regional Economic Communities, the African Union, and multilateral organizations.

The United States and Japan are resolved to achieve a world without nuclear weapons through realistic and pragmatic approaches. It is critical that the overall decline in global nuclear arsenals achieved since the end of the Cold War continues and not be reversed, and the PRC’s accelerating build-up of its nuclear arsenal without transparency nor meaningful dialogue poses a concern to global and regional stability. We reaffirm the importance of upholding the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) as the cornerstone of the global nuclear disarmament and non-proliferation regime and for the pursuit of peaceful uses of nuclear energy. In promoting this universal goal of achieving a world without nuclear weapons, Japan’s “Hiroshima Action Plan” and the “G7 Leaders’ Hiroshima Vision on Nuclear Disarmament” are welcome contributions. The two leaders also welcomed the U.S. announcement to join the Japan-led “Fissile Material Cut-off Treaty Friends” initiative. We reaffirm the indispensable role of the peaceful uses of nuclear technology, committing to fostering innovation and supporting the International Atomic Energy Agency’s efforts in upholding the highest standards of safety, security, and safeguards. President Biden commended Japan’s safe, responsible, and science-based discharge of Advanced Liquid Processing System treated water at Tokyo Electric Power Company’s Fukushima Daiichi Nuclear Power Station into the sea. Our two countries plan to launch the Fukushima Daiichi Decommissioning Partnership focusing on research cooperation for fuel debris retrieval.

To effectively address the myriad challenges outlined above, our global partnership is launching a Deputy Secretary of State/Vice Minister for Foreign Affairs-level dialogue involving our respective aid agencies to align our diplomatic and development efforts globally.

Fortifying People-to-People Ties

People-to-people exchanges are the most effective way to develop the future stewards of the U.S.-Japan relationship. In this regard, we recognize the achievements of exchange programs between our two countries, including the Japan Exchange and Teaching (JET) Programme, KAKEHASHI Project, the Japan Foundation’s programs, and the U.S.-Japan Council’s TOMODACHI Initiative, and commit ourselves to providing more opportunities to meet today’s needs, including through enhanced subnational exchanges on critical issues such as climate and energy. We also recognize the important role civil society has played in strengthening the U.S.-Japan relationship over the past 170 years, including the 38 Japan-America Societies across the United States, the Asia Society, and the 29 America-Japan Societies across Japan.

Building on the Memorandum of Cooperation in Education signed between us on the sidelines of the G7 Leaders’ Summit in Hiroshima, today we announce our commitment to increase student mobility through the new $12 million “Mineta Ambassadors Program (MAP)” education exchange endowment administered by the U.S.-Japan Council for U.S. and Japanese high school and university students who will “map” the future of the relationship with support from Apple, the BlackRock Foundation, Toshizo Watanabe Foundation, and other founding donors. In this regard, we also welcome Japan’s new initiative to expand scholarship for Japanese students through the Japan Student Servicers Organization.

We recognize the significant contributions made by the binational Japan-U.S. Educational Commission (Fulbright Japan) over the past 72 years. We welcome recent changes to upgrade the program by reopening scholarships to Science, Technology, Engineering, and Math (STEM) fields for the first time in 50 years, with the first STEM students on track to participate in academic year 2025-26, as well as removing the tuition cap for Japanese Fulbright participants to attract the highest quality students and researchers.

Celebrating the 30th anniversary of the establishment of the Mansfield Fellowship Program, we honor the legacy of Ambassador Mansfield’s contributions through the University of Montana Mansfield Center and Mansfield Foundation. The two leaders also welcome the creation of the Government of Japan endowed Mansfield Professor of Japanese and Indo-Pacific Affairs at the University of Montana.

Upon the 100 th anniversary of the birth of the late Senator Daniel K. Inouye, who made incredible contributions to our bilateral relationship, we praise the efforts of Japanese American leaders to build a bridge between the two countries and to address common community issues, including through support to the U.S.-Japan Council’s newly launched TOMODACHI Kibou for Maui project. We also share the recognition on the importance of exchanges between our legislatures. We acknowledge the importance of language study, particularly in person, to develop long-term ties and announce a new Memorandum of Cooperation to increase opportunities for the number of exchange visitors from Japan to share their specialized knowledge of Japanese language and culture in the United States, as well as welcome efforts to expand the Japanese Language Education Assistant Program (J-LEAP).

The two leaders also affirm that women in leadership remain their focus and reaffirm our pledge to achieving gender equality and the empowerment of women and girls in all their diversity. We welcome close cooperation on Women, Peace, and Security and Women’s Economic Empowerment initiatives and efforts to promote women and girls’ full, equal, and meaningful participation and leadership in public life.

Finally, we emphasize the need to build a diverse pipeline of future U.S.-Japan experts who understand and support the Alliance. Our peoples form the core of our Alliance, and we reaffirm our commitment to forge ever-closer bonds for generations to come.

Through our shared and steadfast commitment, we have taken bold and courageous steps to bring the U.S.-Japan Alliance to unprecedented heights. In so doing, we have equipped our partnership to protect and advance peace, security, prosperity, and the rule of law across the Indo-Pacific and the globe so that everyone benefits. Today, we celebrate the enduring friendship among our peoples—and among ourselves—and pledge to continue our relentless efforts to ensure that our global partnership drives future peace and prosperity for generations to come.

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