A Partnership Agreement (or Partner Agreement) is a legally binding document that outlines the roles, responsibilities, and rights of each partner in a business partnership. It helps prevent disputes by clarifying how the partnership will operate, how profits/losses will be shared, and how decisions will be made.
Below are the essential components typically found in a Director’s Service Contract:
• Legal name of the partnership.
• Description of the business activities and goals.
• Full names and addresses of all partners.
• Whether they are general or limited partners (in a limited partnership).
• Initial contributions (money, property, equipment, etc.).
• How future contributions will be handled.
• Ownership percentage based on contributions.
• How profits and losses will be shared (e.g., equally or based on capital contribution).
• Timing and method of distribution.
• How day-to-day operations will be managed.
• Voting rights and decision-making processes.
• Roles and authority of each partner.
• Specific responsibilities of each partner.
• Time commitment and effort expectations.
• Designation of partnership bank accounts.
• How financial records will be kept.
• Fiscal year and tax treatment.
• Conditions and process for adding new partners.
• Approval thresholds required.
• How and when a partner can exit the partnership.
• Buyout provisions.
• Handling the death or incapacity of a partner.
• Methods for resolving disagreements (e.g., mediation, arbitration).
• Jurisdiction and governing law.
Non-compete, non-solicitation, or confidentiality clauses.
• Conditions under which the partnership can be dissolved.
• Process for winding up, settling debts, and distributing remaining assets.
• Each partner’s signature, with date.
• Notarisation or witness signatures (depending on jurisdiction
Without a formal agreement, partnerships are governed by default rules of the local law (e.g., in the UK, the Partnership Act 1890), which may not reflect your business intentions. A clear agreement: