What to Include in a Partnership Agreement


Partnership Agreement pic
Partnership Agreement
Image: thebalance.com

A serial entrepreneur, Bill Asher has started more than 25 businesses in his career. To position himself for success, Bill Asher partners with complementary people and organizations in many of his ventures.

Business partnerships should always be supported by a partnership agreement. This is a legally-binding agreement that clearly outlines the terms of the partnership and is signed by both parties. Here are some of the most important issues a partnership agreement should cover:

Partners’ roles. Business partners often have complementary skills. Each, therefore, should have his or her duties and responsibilities outlined in the partnership agreement. This allows each partner to know exactly what to expect from the other. It also clarifies the limits of each partner’s authority. For example, what a partner is specifically not authorized to do on behalf of the business.

Capital contributions. What assets and how much money and time will each partner contribute? Will capital contributions be the basis for profit and loss sharing?

Voting. Partnership decisions are often made by voting. A partnership agreement will set out the procedure for voting and the necessary quorum to hold a vote. It can even require that certain decisions be made only by unanimous vote.

Dissolution and partner’s exit. A partnership agreement should provide the criteria for dissolution once the business of the partnership is done. It should also address boardroom changes in the partnership structure. For example, what will happen when one partner wants to leave, dies, or declares bankruptcy?

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