Free Partnership Agreement Template, Sample & FAQs (2023)

A Partnership Agreement may be used to outline the terms of a new business partnership. It typically includes a list of all Partners to the agreement, as well as their contribution amounts, ownership interest percentages, cost share, and profit share.

The terms of authority, accounting obligations, and buy-out options may also be included in a Partnership Agreement. In addition, partners may want to define management roles, required work hours, and vacation time. Let’s go over some of the essential parts of a Partnership Agreement in more detail.


The contributions section of a Partnership Agreement template sets out what each partner is contributing to the partnership. Each partner will often put something into the partnership to establish it. While contributions are not technically required, they are often a good idea.

First, they show that each partner is invested in the venture—they have literally put an investment into the success of the business. Second, an initial investment also provides legitimacy to the business. Having separate assets for the partnership allows it to function as a standalone business, rather than just as an extension of a few individuals or entities.

Contributions can take many forms, but money and tangible assets are the most common. If a partner contributes funds, those are easy to list out and track. Assets are a bit harder because the partnership should associate a dollar value with the asset. This step is especially important in partnerships where the ownership, distributions, or salaries from the venture are based on a percentage of the initial investment.

Each contributed asset also needs a dollar value assigned to it for tax purposes. This initial dollar value is usually the tax basis. The basis will often be adjusted for depreciation as time goes on, and when the partnership goes to sell the asset, both of these dollar figures will have tax consequences. Talk to a tax advisor for full information about this more complicated aspect of starting a partnership with hard assets such as real estate.

Interest and Authority

The interest and authority section of the Partnership Agreement template describes each partner’s ownership interest in the business venture. Generally, an ownership interest is expressed as a percentage. Partners can choose how much each partner will own.

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As an example, some Partnership Agreements base ownership on the amount of investment into the business. If each partner contributed half of the capital, they would take half of the ownership. If they contribute 60% of the capital, they will own 60% of the partnership.

Others will divide interest based on the anticipated contribution to the partnership. For instance, if one partner is more “active” and the other contributed capital to get the business going, the partnership might choose to vary the ownership percentages based on the relative importance of both of these roles.

The “authority” portion of this section will also set out how voting and management will function. Ownership and authority often go hand in hand—partners with more ownership interest will often have more authority, but not always. Partners could also choose to give everyone an equal vote regardless of ownership percentage.

Partners can be creative and craft an interest and authority scheme that works for them. Many choose to have just one or two partners act as “managing partners” or “designated individuals.” These people (or entities) have the authority to make binding decisions on behalf of the partnership, with or without consultation with the other partners.


The costs section simply sets out who will be responsible for the costs. In most cases, partners will share in the costs equally or based on the amount of ownership they have. Again, partners can craft a cost-sharing scheme that works for their unique situation.


The profits section will describe how profits from the business venture will be divided. These can be equally divided, divided up based on ownership percentages, or divided by any other scheme that the partnership decides.

This section can also address who accounts for the profits and what is considered a “profit.” In most cases, a profit is the amount left over after all costs have been addressed, but not always.

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This section should also set out how profits are paid, including when payments should be made and who makes those payments.


Not every Partnership Agreement will include a separate salary for partners. However, if one or more partners want a set salary, the partnership can include a section about this issue as part of their agreement.

In many situations, if a partnership is just starting, this section will simply state that salaries can be developed in the future. It will also describe how future salaries must be approved (such as by a voting percentage). Then, once the business gets going, the partners revisit this section to set specific salary amounts that will be sustainable for the company.

If the partnership already has a good idea of what kind of profits will be available, they can immediately set a salary and include it in their Partnership Agreement. However, if the partnership takes this type of step, they might also want to include language about what will happen if the business venture cannot pay a specific salary or how industry downturns will be addressed.

Partner Roles

Many Partnership Agreements specifically set out how partners will contribute to the venture. Having this type of discussion and agreement at the outset can address a lot of areas of potential concern in the future, especially when it comes to sharing workloads to make the business thrive.

As an example, the partnership can agree that each partner will work a specific number of hours per week or per month. They might set out specific working hours (like 9 am to 5 pm) or provide a certain number of vacation days. This section might also address emergency situations, such as when a partner cannot work because of a severe illness or accident.

Like many of the other sections, establishing partner roles is flexible. In most situations, the partners can develop a schedule and rules that work for them individually and as part of their specific industry or type of business. Of course, partners can often leave out this section entirely if they want to do that as well.

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The accounting section sets out how the partnership will keep its books and records. This section often includes things like:

  • Whether the partnership will be cash basis or accrual basis when it comes to taxes and accounting records.
  • How often the books and records will be audited.
  • Where the accounting information will be kept.
  • Who will maintain the accounting information.
  • How bank accounts or investment accounts will be maintained.
  • Who the partnership will hire to do its taxes or otherwise address individual partner taxes.
  • When the fiscal year will be (based on the calendar year or some other time period).
  • Who can sign checks and authorize payments to third parties.
  • The process of reviewing books and records when any partner makes a request.

Keeping accurate accounting records is critical for any business. However, it is especially important for partnerships that have several people involved. Knowing who is doing what and putting processes and procedures in place at the outset of the business can address a lot of potential conflicts before they arise.

New Partners

The new partners section sets out how new partners can be added. In most partnerships, a new partner can only be added by a majority or unanimous consent from the other partners. This section might include a description of the voting process, any buy-in requirements, or other information for new partners.

Some partnerships are named after the partners. In that case, this section might also address whether a name change is required when the group adds a new partner.

Withdrawal or Death

Every Partnership Agreement should include a section that addresses circumstances where a partner wants to withdraw from the partnership or passes away. The withdrawal process will usually involve notification methods and a process for their partners to purchase the ownership of the withdrawing partner.

The section that addresses the death of a partner will usually describe how the other partners can purchase or otherwise obtain partnership units from heirs or anyone else that might acquire the deceased partner’s ownership.

Many Partnership Agreement templates also set out that if partnership ownership units are not purchased within a certain amount of time, then the partnership must dissolve.

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Dissolution refers to ending the partnership altogether. This section will usually set out the process for dissolution, including how a dissolution determination is made, such as by vote. In most cases, a partnership can only be dissolved if there is a unanimous decision of all of the partners, but not always. Partners can choose the type of vote necessary for dissolution.

This section also often sets out specific triggering events that will lead to dissolution. Examples of triggering events might include:

  • Death or disability of a partner.
  • Lack of other partners’ desire to purchase a leaving partner’s ownership.
  • Debts cannot be paid as they become due.
  • A court determines that it must be dissolved for any reason.

Many state laws will have default dissolution proceedings that you may need to consider when drafting a partnership agreement.


The Partnership Agreement will also set out specific instructions on how to amend or change the agreement. In most cases, amendments must be in writing, and the majority of the partners must agree to the amendment. Many agreements will require that each partner sign off on the amendment in writing as well.

Dispute Resolution

Dispute resolution refers to any method that is not litigation to resolve a dispute between the members of the partnership. Some of the most common dispute-resolution methods include:

  • In-person meetings and required informal discussions.
  • Mediation.
  • Arbitration.

You can also informally choose a third party to make decisions if there is a dispute between partners on a specific subject.

Creating an agreement for dispute resolution can often help cut down on costs associated with internal disputes because the partners must use this method before they can simply start litigation. It can help partners who have an issue with one or more partners resolve matters before involving third parties.

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Free Partnership Agreement Template, Sample & FAQs? ›

If you are a business owner, looking to draft your own partnership agreement, you can do so using free templates available online. It is advisable to contact a business lawyer or a partnership agreement lawyer to ensure that the agreement follows the federal, state and local laws.

How do you write a simple partnership agreement? ›

A written partnership agreement should show the following to avoid confusion and disagreements:
  1. The name of your business.
  2. The contributions of each partner and the percentage of ownership.
  3. Division of profits and losses between the partners.
  4. Each partner's authority or binding power.
Nov 18, 2021

What are 5 main considerations that should be included in the partnership agreement? ›

Here are five clauses every partnership agreement should include:
  • Capital contributions. ...
  • Duties as partners. ...
  • Sharing and assignment of profits and losses. ...
  • Acceptance of liabilities. ...
  • Dispute resolution.
Oct 9, 2013

What should I ask in a partnership agreement? ›

Partnership Agreement: 50 Questions to Answer
  • Company Name, Location and Hours. What are the partners' names? ...
  • Contributions. What will each partner contribute to the business in terms of: ...
  • Accountability. ...
  • Taxes. ...
  • Liability. ...
  • Responsibilities. ...
  • Ownership and Compensation. ...
  • Buy/Sell Agreement.
Jul 29, 2021

What are at least 3 different items that should probably be included in a partnership agreement? ›

A business partnership agreement should follow a logical process and include the following information:
  • Business generalities. ...
  • Business operations. ...
  • Ownership stake. ...
  • Decision-making process. ...
  • Liability. ...
  • Dispute resolution. ...
  • Business dissolution.
Feb 21, 2023

Can I write my own partnership agreement? ›

If you are a business owner, looking to draft your own partnership agreement, you can do so using free templates available online. It is advisable to contact a business lawyer or a partnership agreement lawyer to ensure that the agreement follows the federal, state and local laws.

What is simple partnership example? ›

For example, let's say that Dottie and Dave decide to open a clothing store. They decide to name the store D.D.'s Duds. Dottie and Dave don't need to do anything special in order to form a general partnership. Once Dottie and Dave agree to form the business, it's automatically considered to be a general partnership.

What are the 4 C's of partnership? ›

It simply operates on the 4 C's: contribution, capability, coverage, and commitment. Contribution is function of the size, frequency, and number of transactions the partner completes each year. Each partner's sales velocity is a direct measure of their contribution.

What four points on information must be included in the partnership agreement? ›

Elements of a Partnership Agreement

Name: Include the name of your business. Purpose: Explain what your business does. Partners' information: Provide all partner's names and contact information. Capital contributions: Describe the capital (money, assets, tangible items, property, etc.)

What are the 3 requirements of effective partnership? ›

Three key elements that can lead to establishing healthy and effective partnerships include communication, collaboration, and commitment.

What is the most important part of a partnership agreement? ›

It's crucial for your contract to state how the profits and losses of the business will be allocated to each partner. This can include how much each will be paid or how losses will be distributed based on the investment.

What is a fair percentage for a partnership? ›

Partnership Percentage means the interest of the Partners in the Partnership and the interest of the Partners in the profits and losses of the Partnership. Initially, the Partnership Percentage shall be 99% to the Limited Partner and 1% to the General Partner.

What is most commonly required to start a partnership? ›

The Partnership Form of Business

Before creating a partnership, it is important to draft a well-thought-out operating agreement that will cover the following: Name of the partners and the process of adding new partners or removing them. Outline of the company. Each partner's percentage of investment and profit.

Are partners taxed on partnership income? ›

Reporting Partnership Income

A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" profits or losses to its partners.

What are the two essential elements of a contract of partnership? ›

Thus as per the above definition, there are 5 elements which constitute of a partnership namely: (1) There must be a contract; (2) between two or more persons; (3) who agree to carry on a business; (4) with the object of sharing profits and (5) the business must be carried on by all or any of them acting for all.

What provision is not typically contained in a partnership agreement? ›

The partnership agreement does not include one of the following: Language relating to the formation, ongoing operation, and ultimate dissolution of the partnership. GAAP. Language relating to the way in which profit and loss is to be allocated to the partners' Capital Accounts.

What makes a partnership agreement valid? ›

A legally binding partnership, however, requires that each partner is assigned specific roles and responsibilities, financial expectations, and future planning expectations for the business. The partnership should also have an agreement as to handling the exit of one of the business partners.

What makes a partnership agreement legal? ›

To legally be considered a partnership, a business relationship must: Include two or more people. Be contractual (oral or written) Involve a business.

Should a partnership agreement always be in writing? ›

Do partnership agreements need to be in writing? Partnerships are unique business relationships that don't require a written agreement. However, it's always a good idea to have such a document.

What is an example sentence for partnership agreement? ›

We insisted that the partnership agreement included pledges to freeze prescription charges and make them free for under-25s—policies that were successfully delivered. He is subject to a partnership agreement and it was up to his partners to decide whether they would release him.

What are the five example of partnership? ›

Partnership Examples:
  • Red Bull and GoPro.
  • Spotify and Uber.
  • Levi's & Pinterest.
  • Maruti Suzuki.
  • Hindustan Petroleum.

What are the three 3 kinds of partnership? ›

There are three relatively common partnership types: general partnership (GP), limited partnership (LP) and limited liability partnership (LLP).

Which type of partnership is best? ›

General Partnership

General partnerships (GP) are the easiest and cheapest type of partnership to form. Two or more general partners own it, with joint and several legal liabilities for all debts and obligations.

Which of the following is not a right of a partner? ›

Being in a partnership firm provides a few rights being right to take part in business, right to access books of account, right to share profits, right to retire etc. But right to receive remuneration is not amongst the rights of the partners.

What are the best partnership principles? ›

The relationship between partners in the Partnership is characterized by mutual trust, respect, genuineness, and commitment.

What is a silent partner? ›

A silent partner is also known as a dormant partner; an investor who becomes a member of a partnership by virtue of capital contribution, but plays an inactive role in the daily operation and management of the business.

What is one of the requirements for a partnership arrangement? ›

A partnership must have two or more owners who share in the profits and losses of a business. Partnerships can form automatically without the submission of formation documents. All partnerships should have a written partnership agreement that spells out the rules and regulations of the business.

What are the six content of partnership? ›

The contents of the partnership deed are:

Names and addresses of all partners. Capital contributed by each partner. Profit-sharing ratio. Amount of drawings allowed to each partner.

How do you write a silent partnership agreement? ›

The Partners agree that the Silent Partner(s) shall be “silent” in the Partnership. The Silent Partner(s) shall not participate in or interfere in the operation of the Partnership and are not restricted from engaging in any other business or from entering into any other partnerships.

What is a standard partnership agreement? ›

A partnership agreement is a legal document that dictates how a small for-profit business will operate under two or more people. The agreement lays out the responsibilities of each partner in the business, how much of the business each partner owns, and how much profit and loss each partner is responsible for.

How do you write a simple written agreement? ›

Write the contract in six steps
  1. Start with a contract template. ...
  2. Open with the basic information. ...
  3. Describe in detail what you have agreed to. ...
  4. Include a description of how the contract will be ended. ...
  5. Write into the contract which laws apply and how disputes will be resolved. ...
  6. Include space for signatures.


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