Easily Create a Free
General Partnership Agreement

Create Your Version of This Document

What is a Partnership Agreement?

A partnership is an agreement between two or more parties to establish and operate a business, including each partner’s share in responsibilities, profits, or losses of the partnership. The benefits of a partnership include having an accessible entity to quickly establish collaboration between partners, favorable tax treatment of partnership income only being taxed once as individual income of the partners (as a pass-through entity), and more flexibility when compared to corporations. The capital contribution of a partner in a partnership can be in the form of cash, real or personal property, or services.

In relation to a partnership, a Partnership Agreement form is an essential contract in order to establish the conduct and affairs between the partners. A written Partnership Agreement helps ensure that your interests, responsibilities, and affairs in the partnership are protected, and are harmonious with those of your partners. A Partnership Agreement can also help define how partnership decisions are to be made, the method of managing the partnership, and how disputes should be resolved should there be any disagreement.

Why Do You Need to Use a Partnership Agreement?

Without a General Partnership Agreement template, your partnership will default to state rules and statutes, which may not suit your unique situation. 

• For example, your partnership may automatically be subjected to dissolution should one of your partners leave or pass away. 
• Secondly, your State rules may also govern the division of profits and debts of your partnership in the absence of an agreement, which may turn out to be unfair for partners who have contributed more capital or effort in the partnership.

A simple Partnership Agreement helps avoid automatic resort to State Partnership laws, which gives you the flexibility to define and protect your rights and responsibilities as a partner. It would also help alleviate disputes between the involved partners since the contents of oral partnership agreements may be too difficult to prove or ascertain.

When Do You Need to Use a Partnership Agreement?

A partnership agreement form is essential at the very inception of your business relationship, even if your partnership feels informal or based on mutual trust. While the law does not mandate a written agreement to create a partnership, operating without one leaves you vulnerable to misunderstandings, disputes, and potentially unfavorable legal defaults governed by state partnership laws.

Consider the following scenarios where having a simple partnership agreement can make a critical difference:

1) Disparity in Contributions

— One partner may invest significantly more capital, resources, or effort into the business. Without a written agreement specifying contributions and profit shares, the law might dictate an equal division of profits and losses, which can lead to resentment or unfair outcomes. A general partnership agreement clarifies each partner’s input and entitlements.

2) Profit and Loss Distribution

— Partnerships often rely on verbal agreements regarding profit splits. However, if a disagreement arises, it becomes difficult to prove what was originally intended. A written agreement ensures that the distribution of profits and losses aligns with the agreed-upon structure, preventing ambiguity and conflict.

3) Decision-Making Authority

— Partnerships may involve multiple individuals with different visions and management styles. A partnership agreement form should define how decisions are made, the weight of each partner’s vote, and procedures for resolving deadlocks. This prevents gridlock and ensures smoother operations.

4) Exit Strategy or Partner Departure

— A partner may wish to leave the partnership or, in unfortunate circumstances, pass away. Without a simple partnership agreement in place, the partnership could automatically dissolve or lead to complex legal battles over asset division. Defining the exit process in advance through a formal agreement protects the business from disruption.

5) New Partners

— As your business grows, you might consider adding new partners. A free partnership agreement template can provide a framework for onboarding new members, outlining their contributions, and adjusting profit-sharing ratios without renegotiating from scratch.

6) Protection from External Liabilities

— Partners are often jointly and severally liable for business debts. If one partner takes on obligations without the consent of others, the entire partnership could be at risk. A clear agreement limits the ability of individual partners to unilaterally bind the business, safeguarding everyone’s interests.

Ultimately, using a partnership agreement form early on protects your partnership from potential pitfalls, ensuring all partners understand their rights and obligations. By establishing these terms before the partnership begins operations, you mitigate risks, foster trust, and set the stage for long-term success.

Are there any deadlines or times for when this form is needed?

It would be ideal to have a written Partnership Agreement before the commencement of the partnership – oral contracts are almost impossible to prove because of their very nature.

What are the Most Common Mistakes to Avoid?

Sometimes, it would be tempting to skip a written Partnership Agreement (or to enter into one with informal provisions) when forming a partnership simply because you “trust” your relative or childhood friend partner – however, a legal conflict can quickly change and escalate the complexion of your disagreement. Common conflicts include when one partner becomes dissatisfied with bearing a bigger weight of the responsibilities, or if there is simply an incompatibility in the personalities of the partners.

Of course contractually speaking, major mistakes would involve failing to properly define or include any of the following: 

1. The contributions of each partner; 
2. The partnership interest of each partner; 
3. The voting and mechanism needed to implement partnership decisions (especially if there is a dispute); 
4. Provisions relating to how a partner can voluntarily leave or be forced out of a partnership, and how a partnership can be dissolved.

What are the Main Things that Go on this Form?

A well-crafted partnership agreement form is the foundation of a successful partnership. It not only establishes the structure and day-to-day operations of the business but also provides a roadmap for handling challenges, changes, and disputes. Whether you’re using a general partnership agreement template or drafting from scratch, the following elements are essential to ensure your agreement is comprehensive and legally sound.

1. Partner Names and Details:

Clearly identify each partner involved in the business. This section should include full legal names, addresses, and contact information for all partners. This serves as the official record of partnership membership and can be critical for legal clarity.

2. Business Information:

The agreement should outline key details about the partnership itself, including:

• Business Name – The registered name under which the partnership will operate.
• Purpose of the Business – A concise description of the business activities or industry.
• Location – The principal place of business, including the physical address.
• Governing State – Specify the state whose laws will govern the partnership.
• Start Date – Indicate the official commencement date of the partnership.

3. Capital Contributions and Ownership Interests:

Each partner’s initial contribution—whether in cash, property, or services—must be documented. This section should also define the ownership percentage or interest of each partner, ensuring that contributions align with profit and loss allocations.

For example:

• Partner A contributes $50,000 and receives 50% ownership.
• Partner B provides services valued at $30,000 for 30% ownership.
• Partner C contributes equipment worth $20,000 for 20% ownership.

Including this in your partnership agreement prevents confusion and lays the groundwork for equitable profit distribution.

4. Profit and Loss Sharing Mechanisms:

Clarify how profits and losses will be distributed among partners. This could be based on capital contributions, equal shares, or a fixed percentage outlined in the agreement.

• Equal Shares – Partners split profits equally regardless of their contributions.
• Contribution-Based – Profits and losses are divided proportionally to capital contributions or ownership percentages.
• Custom Arrangement – A unique division agreed upon by the partners.

This section also provides clarity on reinvestment strategies, drawing rights, and how deficits are handled.

5. Management Structure and Decision-Making:

Define how the partnership will be managed and who holds decision-making authority. The agreement should address:

• Managing Partner – Will one partner take the lead in daily operations?
• Voting Rights – Is voting proportional to ownership interests, or does each partner receive one vote?
• Approval Thresholds – Establish whether unanimous consent or a simple majority is required for major decisions.

By outlining management duties in your general partnership agreement, you help ensure smooth operations and reduce potential conflicts.

6. Partner Withdrawal, Expulsion, or Dissolution:

One of the most critical elements of a partnership agreement form is the protocol for partner exits or the dissolution of the partnership. This section should cover:

• Voluntary Withdrawal – Procedures for a partner who wishes to leave.
• Expulsion – Grounds and processes for expelling a partner due to misconduct, non-performance, or breach of duty.
• Dissolution – Terms under which the entire partnership may be dissolved, including distribution of remaining assets and liabilities.

A clearly defined exit strategy ensures the business can continue operating smoothly or wind down in an orderly fashion if necessary. This not only protects the interests of the remaining partners but also helps avoid prolonged legal battles.

7. Financial Records, Audits, and Accounting Procedures:

Transparency in financial management is vital for maintaining trust and accountability. The agreement should specify:

• Access rights for partners to review financial statements and records.
• How and when financial records will be kept and maintained.
• Frequency and methods of audits, if applicable.
• Accounting standards to be followed (e.g., accrual or cash basis).

Do I need to use a lawyer, accountant or notary to help me?

Consulting a lawyer, accountant, or notary is not an essential requirement for a Partnership Agreement.

What is the Easiest Way to Create a Partnership Agreement?

Creating a solid and legally sound partnership agreement form doesn’t have to be complicated or expensive. By using an intuitive, fillable template, you eliminate the guesswork, ensuring that no critical details are overlooked. A well-crafted agreement protects your business, clarifies partner responsibilities, and prevents disputes—laying the foundation for long-term success.

Why take the risk of missing essential clauses or spending hours drafting from scratch when you can generate a professional agreement in minutes? With FormPros, creating a partnership agreement is as simple as answering a few guided questions. Our free partnership agreement template adapts to your specific needs, ensuring accuracy and completeness every time.

Don’t leave your partnership to chance—empower your business with a clear, customized agreement today. Click below to get started and instantly download your personalized general partnership agreement template. Secure your partnership’s future with ease and confidence.

Create a Partnership Agreement Now

Simplify your paperwork with FormPros! From creating paystubs, W-2s, and 1099-NEC forms to generating LLC Operating Agreements and even voided checks, our easy-to-use platform has you covered. Save time, reduce errors, and handle your business documents with confidence. Start now and see how FormPros makes professional form generation fast, affordable, and hassle-free!

General Partnership Agreement FAQs

• Can a Partnership Agreement be amended after it’s signed?
  Yes, a Partnership Agreement can be amended, but it requires the consent of all partners. Amendments should be documented in writing, signed by all partners, and added as an addendum to the original agreement to ensure legal validity.
• What happens if one partner violates the terms of the Partnership Agreement?
  If a partner breaches the agreement, the document should outline remedies such as mediation, arbitration, or legal action. Penalties for specific breaches, like financial compensation or expulsion from the partnership, can also be defined within the agreement.
• Is a Partnership Agreement necessary for non-profit partnerships?
  While not legally required, a Partnership Agreement is beneficial for non-profit partnerships to define roles, responsibilities, and how resources and funds are managed, ensuring smooth operation and reducing disputes.
• How does a Partnership Agreement handle intellectual property (IP) created by partners?
  The agreement can specify ownership and usage rights of any intellectual property developed by the partnership or its partners. It should clarify whether the IP belongs to the partnership entity or individual creators.
• Can a partnership include individuals and corporations as partners?
  Yes, partnerships can include both individuals and business entities like corporations or LLCs. The agreement should clearly define the contributions and roles of each type of partner.
• Are there tax implications if the partnership operates in multiple states?
  Yes, partnerships operating in multiple states may be subject to tax filings in each state. A Partnership Agreement should account for multi-state operations, including how taxes and compliance costs are managed.
• Can a partnership operate without a written Partnership Agreement?
  Yes, partnerships can operate based on verbal agreements or state default rules, but this leaves all parties vulnerable to misunderstandings and legal disputes. A written agreement provides clarity and protection.
• What is a ‘silent partner,’ and can they be included in the agreement?
  A silent partner is an investor who does not participate in daily operations but shares in the profits or losses. The agreement should specify their rights, profit-sharing percentage, and limitations on decision-making authority.
• What is the difference between a General Partnership and a Limited Partnership?
  In a General Partnership, all partners share equal liability and responsibility. A Limited Partnership includes both general partners (managing the business and assuming liability) and limited partners (investors with liability restricted to their contributions).
• How are disputes resolved if the Partnership Agreement is silent on the issue?
  If the agreement does not address dispute resolution, state default laws govern. This may include litigation or state-specific remedies, which could be time-consuming or unfavorable. Including dispute resolution clauses in the agreement is highly recommended.