51+ Sample Partnership Agreements

What are Partnerships in Business?

“Two heads are better than one” is a famous saying that you’ve probably heard a thousand times in your lifetime. But what does it really mean? Most of the time, it means you can achieve more things or solve problems easier and faster if you do them with an extra helping hand. The concept of a partner is nothing new as it has been in existence since time began. Partners compose a partnership—what is a partnership? In simple terms, an organization is an association of persons working together in managing and operating a business. These people are called partners. Some key features of a partnership include common ownership of a business, contribution to the company in the form of money, property, or skills sharing in the profits, as well as the losses of the market, and participation in the management and operation.  

Importance of a Partnership Agreement

We should always do research and make ourselves knowledgeable on an activity we want to venture into. Forming a business partnership is a huge commitment. That’s why it is preferred we put such agreement in writing, to establish the partnership fully. So, why is a partnership agreement relevant in starting a partnership? To mention a few:

Sets the Roles of Each Partner

It also sets the scheme of profit-sharing between deciding who manages, who contributes, how much has been initially contributed, and how much share a partner receives from the generated profit. Basically, it is a blueprint of not only the external but as well as the internal affairs of the business.

Avoids Miscommunication

Generally, people enter into written partnership agreements to avoid miscommunication and to ultimately avoid any legal disputes that may arise during the life of a partnership. Individuals forming the partnership discuss beforehand the nitty-gritty; then, place it in writing to serve as concrete evidence of what was agreed upon before the creation of the partnership. 

Puts Everything in Writing

Partnership agreements map out the existence of the partnership, from it’s formation to its termination. It provides the structure of management and control within the formed organization. Whenever questions on governance and profit-sharing arise, partners and third persons may refer to the partnership contract for guidance. 

Increases Opportunities for Both Parties

Forming a partnership within another person increases business opportunities. Consider this. John has a crate of mangoes, and Mary owns a juicer; they entered into a partnership agreement and opened a mango juice stand. By entering into a partnership, John and Mary were able to open their own business. 

Helps a Business Grow

Lastly, partnership agreements help small businesses grow and flourish into something with potential through the resource pooling arrangements. Company A, a small business locally owned, owns a field of mango trees and sells mango fruits; on the other hand, Company B owns a plant specifically for mass production of dried fruits to sell nationwide. If Company A and Company B enter into a partnership to mass-produce dried mangoes, both companies greatly benefit from each other. By pooling resources with another company, Company A, a small local business, can sell products on a large scale. 

Key Provisions Found in a Partnership Agreement

A partnership agreement is a type of business contract, and like any other contract, it contains clauses common to it’s kind. Below are some common provisions found in partnership agreements. 

Partnership Name: Most partnerships use the names of its members. i.e., John & Mary Juice Co.Purpose of Establishing the Partnership: This talks about the type of business you want to venture with your partner. Let’s say. You want to create a small business specifically catering to animal needs (i.e., pet store)Member information: This section provides a list of the names and addresses of all of the members of the partnership. This is important because it identifies who forms part of the partnership, who shall share the profits and the losses of the business venture.Member contributions: This is an inventory together with a brief description of the contributions made by the members of the partnership, which is either in the form of money, property, services, or skill sets.Scheme for distribution of business profit and loss: This provides a structure on how the profits and losses of the Partnership will be distributed, as well as how often distribution is made to the members. Typically, the percentage of distribution is based on the capital contributions made by each partner.Management and Control: This part of the partnership agreement provides the percentage of control a partner has over the partnership. It is common in associations to establish a voting structure within the organization. The number of voting rights a partner has usually depended on the amount of his capital contribution or ownership interest in the partnership.Death, withdrawal/resignation, and addition of Members: This section provides a set of rules and processes to follow in the event of death, resignation, as well as, the introduction of new members in the partnership.Partnership duration: This provides the time frame for which the partnership will exist. A partnership can be a partnership at will or a partnership for a fixed duration: A partnership-at-will exists until any of the members dies or resigns. On the other hand, a partnership for a fixed duration has a specific date that provides its termination.Partnership Termination: This section provides the scheme of distribution in the event of dissolution of the partnership—what goes to whom?Alternative Dispute Resolution: This section provides a solution in case of disagreements between partners in the decision making aspect—a deadlock. Rather than taking issues to court, an alternative method for party mediation is provided.Applicable law: This section provides the law which shall govern over the partnership and the organization. Typically, it’s the law of the state the partnership was formed and organized.

How do Partnership Agreements Differ?

1. General Partnership Agreement

The most common type of partnership agreement. In this structure, two or more persons contribute money, property, or service for the creation of a business; they share in the profits and losses equally. In addition, all members of the partnership take part in the management and operation of the business. This form of a partnership agreement is used by numerous types of small businesses: coffee shops, restaurants, flower shops, local markets, and the like. To provide a concrete example, let’s say, Mr. A wants to open a laundry shop. However, he does not have enough funds to operate one. He emails a business partnership proposal to his friend Mr. B. Now, Mr. A and Mr. B are operating and managing a laundry shop together—both of them have become general partners in a laundry business.

2. Professional Partnership Agreement 

This is a partnership agreement whereby two or more persons who exercise a profession—lawyers, engineers, accountants, or doctors— agree to offer their respective services to the public under a common business name. As a partnership, each member has a share in the business assets, profits, and losses. A concrete example is a law firm, an organization of individuals who engage in the practice of law and offers their services to the public under a common business name, which is usually named after its senior lawyers or founders. The lawyers who compose a law firm—usually the senior lawyer/senior partners— jointly own and operate the enterprise.

3. Joint Venture Agreement

This is a partnership agreement whereby two or more associations, partnerships, corporations, or any other form of business entities agree to combine or share their resources for the accomplishment of a specific project. In effect, a new entity is created, which is separate and distinct from the business entities which form it. 

An example of a successful joint venture agreement is the research and development partnership of Google and NASA—which ultimately gave us Google Earth. The common objective of the partnership was to provide public access to cosmic information regarding space and space exploration. In the process of the partnership, Google provided and funded research facilities and development campuses in NASA Research Park. And in the span of a few years, they were able to launch Google Earth, which allowed the public to explore the outside world without going outside. 

The purpose of entering into joint venture agreements is usually for mass production or research. By forming a partnership with another business entity, the production of goods and/or services and research and technology development has been made possible.  

4. Consortium Agreement

It is a partnership agreement of several organizations agreeing to share their resources for a common goal. These are often used by the nonprofit sectors, most commonly educational institutions. And that is by sharing school resources like libraries, research papers and journals, and educators for the benefit of the student population. You may also encourage sharing and freeflow of knowledge. In simple terms, a consortium is a partnership formed by schools and universities to enable them to make use of each other’s resources. 

How to Write a Legally Binding Partnership Agreement

Generally, formally executing a partnership agreement is not required. Still, when it comes to safeguarding your business, it is essential to keep evidence of the existence of previous transactions for legal purposes. You already know what a partnership is, its importance, standard provisions found in it, and it’s different kinds. You can now start drafting your own partnership agreement. In addition, below are some tips to guide you further. 

1. Read Relevant Laws

Familiarization of existing laws governing creations of a partnership is primal before actually drafting an outline of a partnership agreement. You need to know the necessary laws to understand what to include in the contract you’re writing. Read and research on both national and state laws concerning the formation of partnerships, as well as the rights, obligations, and liabilities connected to it. Each state has different requirements for business partnerships, be sure to familiarize yourself with them. 

2. Make an Outline 

When creating an outline, make sure to incorporate the common contents of a partnership agreement that we’ve discussed earlier. These are essential key provisions that should not be omitted in your contract. Each of those sections serves a purpose, so consider them when drafting the partnership agreement. 

3. Start Writing 

You know the essential contents of a partnership agreement, the laws, and you even have an outline. Start filling that structure with cement and finally start writing the flesh and breathe of your contract. Describe, define, and explain each section to prevent misunderstanding. Remember to be clear and concise; don’t leave room for misinterpretation. When you finally finish drafting your partnership agreement, re-read and revise; as many times as necessary until you’re confident with the final written product. 

4. Hire a Lawyer 

Writing a deal can be difficult and time-consuming. Sometimes it can be scary since it involves future legal disputes. If you don’t feel confident in yourself and the above discussion and tips fail, you can always hire a lawyer. It’s much easier and convenient. 

5. Use a Template

Do you know what else is convenient? Just use a template online. It’s faster, easier, and little-to-no hassle. All you have to do is search online, or find one on our page, edit a few words to your specifications, print it, and you’re done. Easy right? 

Creating and customizing a contract for your business can be a daunting thought, but do not fret. Anyone can write an agreement. It’s just a matter of dedication, time to spare, and research. However, if you’re in a hurry, just browse in our listing of readily available and printable partnership agreement template, and you’re good to go.