What is a Partnership Agreements?

Business partnerships are often formed on shared aspirations and goals of a successful joint venture. However, it is not uncommon for business partnerships to dissolve over bitter arguments about assets, profits and decisions.

A partnership agreement is a binding contract between the individuals joining together for the goal of business profit. Like a shareholder agreement, it will clearly outline the terms as between the partners in the operation of the business.

Partnerships can be complex depending on the scope of business operations and the number of partners involved. – Investopedia

A partnership agreement will generally include the following:

  • How the profit, losses and shares of the business will be divided;
  • The amount of money and assets each partner will invest into the business;
  • The potential of new partners joining the partnership;
  • The potential of partnership dissolution;
  • The different roles and responsibilities of each partner;
  • How to resolve any disputes and misunderstandings that may arise between partners.

For those who do not wish to incorporate, a comprehensive partnership agreement can help avoid misunderstandings among partners as to the operation of the business. It is an essential foundation that ensures that the interests of the partners are aligned and aids in the effective running of the enterprise.

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Last updated: 28 November 2019