Generate A Partnership Agreement with LegalZone
Generate A Partnership Agreement with LegalZone
What Is a Partnership Agreement?
A partnership agreement lays out the arrangement between two or more parties who choose to create a business together.
The agreement details who shares what percentages of the ownership, profit/loss, and liability.
What Is a Partnership Agreement Document?
While a partnership agreement can be verbal, having a written contract protects all parties involved in the business venture.
If one party breaches the agreement for any reason, then an official partnership agreement document will solidify any legal action you take.
What Should a Partnership Agreement Include?
- The legal name of the business
- A short description of the business
- Contact information for each partner
- Details about the initial contributions made by each partner
- Percentage of ownership for each partner
- Profit/loss distribution among partners
- Details about how the company will be managed
- Procedures for voting and making company decisions
- Protocol for the addition or removal of partners
- The conditions for how the partnership can be dissolved
- Tax elections and designation of a representative for the partnership
- Assignment of management roles within the company
What Are the Four Types of Partnerships?
1. General Partnerships: the simplest form of partnership that exists without forming a business entity in the state. General partnerships go into effect as soon as the agreement is signed, and each partner retains a level of independence. Unless otherwise specified in the document, the profits are split evenly, and each member has complete liability within the business. While it’s easy to get a company built on a general partnership up and running quickly, if one partner takes out a loan on behalf of the business that the business can’t repay, all partners are responsible for the debt.
2. Limited Partnerships (LP): agreements that are made for state-recognized business entities. These partnerships typically consist of a leading partner and one or more limited partners who are financially invested in the business but don’t participate in business operations. Limited partners are not responsible for debts or liabilities related to the company. If limited partners want to be actively involved in the business, they lose the benefits of being protected as a limited member.
3. Limited Liability Partnership (LLP): a partnership that operates as a general partnership but allows members to limit individual liability based on the partner’s actions. This protects the partners because they can only be held accountable for debts and legal issues that apply to them. LLPs are not accepted in every state and are often reserved for certain professions such as doctors, lawyers, and accountants.
4. Limited Liability Limited Partnership (LLLP): an arrangement that is relatively new and isn’t accepted by many states yet. This partnership is similar to a limited partnership but gives liability protection to all members. This structure is not recommended for companies who work in multiple states since only a handful of states recognize LLLPs.
Why Should I Have a Written Partnership Agreement?
If your partnership isn’t written out and signed by all parties, it will be harder to uphold in court. Verbal agreements can be contested, and a written contract protects all members of the company.
Having an official document outlining your business’s partner structure protects your business in the event of legal disputes or an audit by the IRS.
Internally, the document can be used to solve debates or answer questions about protocol. Creating a document that directly states roles, responsibilities, and percentages will help you clear up any bumps in the road while you run your business.
Can You Write Your Own Partnership Agreement?
Yes. You can gather the information needed and use our template [AI1] to draft a partnership agreement that complies with your state’s ordinances.
Create a Partnership Agreement with LegalZone
To make sure your partnership agreement encompasses everything and sets up the best arrangement for your company, work with LegalZone customer support specialists or have an attorney assist you.
We’ll make sure you’re picking the partnership that benefits you the most, and your document uses indisputable language and follows local laws. We make it affordable and easy to draft a partnership agreement that will protect all members of your business.
If you have questions about what partnership agreement is right for you or which details should be included, you can have an attorney assist you.
If you’re ready to get started, answer a few questions, and we’ll get you a template to edit.
Start Your Partnership Agreement