A partnership agreement is a legal agreement between two or more people that formally regulates an ongoing relationship between partners in a business. The aim of a partnership agreement is to protect the shared intentions and interests of each partner involved in a business pursuit.Schedule a call
What is a partnership agreement?
When entering a partnership in business, it’s crucial your business agreements are formalised. A partnership agreement governs and outlines the foundations of the business conduct of your partnership.
This legally-binding partnership contract ensures your intentions and goals are clearly communicated, agreed upon, and protected, and determines that profits, responsibilities, and risks are shared by each partner, as are the actions of individuals within the partnership.
It also provides every individual with a blueprint for mediating and resolving any potential disputes.I need a partnership agreement
What do partnership agreements include?
This written partnership contract clearly outlines the maintenance of the Partnership account, the duties, responsibilities and limitations of each partner, the operation of shares, and the sharing of property, capital and profit (or losses).
This beneficial business partnership contract also outlines the specific rules that govern the dissolution of the partnership and the terms regarding retirement, death, or the dismissal of a partner.
Learn more about what’s included in a partnership agreement.Schedule a chat
Can I use a template?
Every business partnership is unique, so it’s important to avoid generic templates that are often ambiguous and unenforceable.Get in touch
Key components of a Partnership Agreement
Clearly define the type of partnership, such as a normal partnership, limited partnership or Incorporated limited partnership.
This section should also specify the names and roles of each partner, their contributions, and the duration of the partnership.
Profit and Loss Distribution
Outline how profits and losses will be allocated among the partners.
This may be based on the capital contributions, effort, or a predetermined ratio agreed upon by the partners.
Management and Decision-Making
Specify the decision-making processes, voting rights, and responsibilities of each partner.
It is essential to address how major decisions will be made, such as entering into contracts, hiring key personnel, or expanding the partnership.
Contributions and Capital
Detail the capital contributions required from each partner and the process for making additional contributions if necessary.
This section may also cover the withdrawal of capital and how partner loans will be treated.
Address the procedures for dissolving or terminating the partnership.
This includes the distribution of assets, settlement of liabilities, and any non-compete or confidentiality clauses.
Specify the method for resolving conflicts or disagreements between partners.
Mediation, arbitration, or litigation can be considered, depending on the complexity of the partnership and the preferences of the partners.
Benefits of a bespoke partnership agreement
Clarity and Alignment
By clearly defining the roles, responsibilities, and expectations of each partner, a partnership agreement minimises ambiguity and reduces the likelihood of misunderstandings. This clarity ensures that all parties are aligned and working towards shared objectives.
A comprehensive partnership agreement addresses potential risks and liabilities, protecting each partner’s interests. By outlining dispute resolution mechanisms and exit strategies, the agreement helps partners navigate challenges and minimize potential disruptions.
Clear guidelines for decision-making, profit distribution, and partnership management improve operational efficiency.
When partners know what is expected of them and how decisions are made, they can act decisively, leading to smoother operations and faster growth.
A well-drafted partnership agreement provides legal protection for all parties involved.
In the event of a dispute or disagreement, the agreement serves as a reference point, ensuring that the partnership is governed by mutually agreed-upon terms and reducing the risk of legal complications.
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Crafting a partnership agreement that covers all essential aspects requires a deep understanding of business dynamics and legal considerations. We specialise in creating tailored partnership agreements that suit your unique needs.
Fill in our contact form and one of our team will be in touch. You can also phone 1300 149 140 during standard business hours.
Frequently Asked Questions
Why are partnership agreements important?
A partnership agreement is a legally binding document that outlines the terms and conditions of a partnership. It is important because it clarifies the rights, responsibilities, and expectations of each partner, minimising misunderstandings and disputes.
Read our article on Why Partnership Agreements are Important.
Can a partnership agreement be modified or amended?
Yes, a partnership agreement can be modified or amended, but it generally requires the consent of all partners. It is advisable to consult a lawyer to ensure that any changes are made in compliance with relevant laws and regulations.
What’s the difference between a Joint Venture and a Partnership Agreement?
A joint venture involves two or more persons or entities joining together for a particular project.
A partnership is described as a relationship which exists between people carrying on a business, with a common view of making a profit. It also includes incorporated limited partnerships.
Read our article on Joint Ventures VS Partnership Agreements
Can a partnership agreement protect intellectual property rights?
Yes, a partnership agreement can include provisions that address the ownership, use, and protection of intellectual property. This helps prevent disputes over intellectual property rights and ensures the fair treatment of partners’ creations or inventions.
Learn more about Intellecual Property for business.
Can a partnership agreement address the admission of new partners?
Absolutely. A partnership agreement can specify the process and criteria for admitting new partners. It may outline the required capital contributions, decision-making rights, and any necessary approvals from existing partners.
What happens if a partner breaches the terms of the partnership agreement?
If a partner breaches the partnership agreement, the agreement typically outlines the steps for resolving the issue, such as mediation, arbitration, or legal action. Remedies may include financial penalties, termination of the partnership, or other measures defined in the agreement.
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