A Partnership Agreement is a written document used to formalize a relationship between two or more business partners. The agreement is necessary for individuals who decide to run a for-profit business together.
- Partnership Contract.
Business partners use Partnership Contracts to map out the goals of the partnership and to define its terms to avoid any disagreements in the future. This contract can be created before establishing the company or after the partners have already worked together for some time. The term is interchangeably used to describe two concepts:
- A contract used to legally establish a Partnership – a form of business where two or more people share ownership – and register it with the state where it's organized (aka. a "generic Partnership Agreement" or "Articles of Partnership").
- A contract used to map out the terms and conditions of a "joint venture" – a short-term business, a collaboration, etc. (a Band Partnership Agreement is an example of that concept).
A Partnership Dissolution Agreement is a related document used when the participating parties want to end their partnership.
When establishing a partnership, business partners should carefully outline its rules and their responsibilities to ensure clear communication between all parties. Business partners share the ownership of the company and are equally liable for its obligations and debts, as well as for the actions of the other members of the partnership. A formal agreement outlines the voting power of each partner, the distribution of profits and losses, and sets rules for financial reporting.
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This is a legal contract signed by individuals who intend to become partners and form a company with the intent of making a profit.