Partnership Contract Template

This Partnership Agreement ("Agreement") is made and entered into on  ("Effective Date") by and between  ("Partner 1"); and  ("Partner 2") (each referred to individually as a "Partner", and collectively, the "Partners").

1. Formation and Name

The Partners form a partnership named  ("Partnership") and elect one of the following forms of partnership:

 General Partnership: Each Partner may be personally liable for Partnership debts and obligations. Creditors may pursue one or all Partners directly for the full amount owed.

Partner 1 Initials: ; Partner 2 Initials: 

 Limited Liability Partnership (LLP): If the Partners elect to operate as a Limited Liability Partnership (“LLP”), they must timely file and maintain registration, renewals, and all documents required by the laws of the State of . The Partners acknowledge that until such filings are made and remain effective, the Partnership is treated as a general partnership, and each Partner remains personally liable. Partner 1 Initials: ; Partner 2 Initials: 

2. Purpose and Principal Office

The purpose of the Partnership is to , together with activities customary and necessary to that business. Any activity not part of the Partnership’s usual and necessary business requires the prior written consent of all Partners. If there is a dispute, the activity is treated as outside the usual business and may proceed only with unanimous written consent.

The principal office of the Partnership shall be located at

.

3. Definitions

Key terms used in this Agreement, including "Capital Contribution", "Partnership Interest", "Major Decision", and "Fair Market Value (FMV)", are defined in Exhibit A (Definitions), which is incorporated into this Agreement by reference.

4. Capital Contributions and Ownership

(i) Initial Contributions. The Partner 1 contributes  valued at $ for an ownership interest of %. The Partner 2 contributes  valued at $ for an initial ownership interest of %.

(ii) Valuation of Non-Cash Contributions. Non-cash contributions are valued at Fair Market Value by agreement. If the Partners cannot agree, each shall appoint an independent appraiser with at least 5 years’ experience, and those two shall appoint a third. The third appraiser’s valuation is final. Appraisal costs are split equally.

(iii) Additional Contributions. The Partners may unanimously approve additional pro rata contributions. If a Partner does not contribute, the other Partner(s) may: (a) advance the shortfall as a loan at prime + %, ranking behind third-party debt, but ahead of distributions; or (b) treat it as an additional contribution that shifts ownership from the non-contributing Partner to the contributing Partner(s), valued under the Valuation of Non-Cash Contributions Section.

(iv) Capital Accounts and Withdrawal of Capital. Capital accounts shall be maintained in accordance with Sections 704(b) and 704(c) of the Internal Revenue Code. A Partner owing money to the Partnership at dissolution, including unpaid contributions or loans, must repay it unless unanimously waived. No Partner may withdraw capital except as expressly provided in this Agreement.

5. Profits, Losses, and Distributions 

(i) Allocations and Regular Distributions. Profits and losses are allocated in proportion to ownership interests unless unanimously changed. Cash distributions shall be made on a , by majority approval, subject to adequate reserves for expenses and debt.

(ii) Tax Distributions. Each fiscal year, the Partners set a flat Tax Distribution Rate %, applied uniformly. Each Partner receives distributions equal to that rate times the Partner's allocated taxable income, reduced by prior tax distributions. Unpaid amounts accrue until paid.

(iii) Year-end True-up. At year-end, amounts are adjusted to each Partner’s actual combined tax rate (including self-employment tax and NIIT). Excess is treated as an advance against future distributions; shortfalls are paid within 60 days. If a Partner does not provide evidence of their tax rate by , the flat rate applies.

6. Management and Duties

All Partners participate in day-to-day management. Ordinary decisions require a majority vote; Major Decisions require unanimous consent as defined in Exhibit A. Each Partner shall act in good faith and loyalty, avoid conflicts of interest, promptly disclose potential conflicts, and disclose business opportunities reasonably related to the Partnership.

Each Partner shall, as elected below, be bound by one or both options:

 Option A – Time Commitment. Devote a minimum of  hours per week during normal business activity, unless unanimously adjusted. Time may be reduced if business slows. Other ventures are permitted if they do not interfere with duties or compete with the Partnership.

 Option B – Assigned Duties. Fulfill the duties and responsibilities assigned by unanimous agreement of the Partners, rather than a fixed number of hours. Duties may include (without limitation): . Each Partner shall use good faith and reasonable efforts to perform these duties, considering the Partnership’s size, stage, and needs.

No Partner may compete with the Partnership without unanimous consent. Any competing transaction is voidable and may trigger buyout. A Partner may bind the Partnership only for contracts or commitments that are part of its usual and necessary business, and only up to $ per fiscal quarter (aggregated). Larger or outside-scope commitments require unanimous written consent under the Purpose and Principal Office Section.

7. Banking and Authority

The Partnership shall maintain accounts solely in its name. Partnership funds may not be commingled with any Partner’s personal funds. The Partners shall designate authorized signers for checks, electronic payments, and withdrawals shall be designated by unanimous agreement.

8. Partner Compensation and Expenses

No Partner shall receive a salary unless unanimously agreed. Reasonable business expenses are reimbursable with documentation; expenses over $ or outside the ordinary course require majority approval. Reimbursement shall be made within  days of submission. Loans or advances by the Partner(s) bear interest at prime + % and are repaid from available cash before profit distributions, but after third-party debt, as provided in the Capital Contributions and Ownership Section.

9. Adding or Removing Partners

The admission of a new Partner requires the unanimous consent of all Partner(s). A Partner may be expelled for fraud, theft, willful breach, failure to meet a capital call, incurring unauthorized debt, or failing to cure a material default within 30 days after written notice. Expulsion requires the unanimous approval of the remaining Partner(s) and is subject to the Buyout section.

10. Buyout

If a Partner’s Interest must be purchased due to withdrawal, death, disability, expulsion, or deadlock, the price shall equal Fair Market Value, including goodwill and excluding minority or marketability discounts unless unanimously agreed. The Partners shall jointly appoint an independent appraiser with at least 5 years’ experience; if the Partners cannot agree, each Partner appoints one; those two appointed appraisers shall select a third, whose decision is final. Appraisal costs are shared equally.

The price shall be paid in equal installments over  years at % interest, beginning within  days after valuation, under a promissory note secured by the Interest sold. Prepayment is allowed without penalty. Insurance proceeds, if available, apply first. Failure to pay on time is a default. If uncured within 30 days, the selling Partner or the Affected Party (as defined in Exhibit A) may accelerate all payments and recover collection costs, including attorneys’ fees.

11. Withdrawal, Death, or Disability

A withdrawing, deceased, or incapacitated Partner, or the Affected Party, shall be bought out under the Buyout section. A Partner is disabled if unable to perform material duties for 6 months in any 12-month period, certified by a physician. If disputed, a neutral physician is jointly selected by the remaining Partner(s) and the Affected Party; if no agreement within 30 days, one is appointed by a court or medical arbitration body. For incapacity under 6 months, the remaining Partner(s) manage the Partnership until the Partner resumes or is deemed permanently disabled. The Affected Party holds only economic rights, with no management or voting rights, unless unanimously admitted as a Partner. Until buyout is complete, the Affected Party remains bound by cooperation obligations and the Confidentiality, Intellectual Property, and Restrictive Covenants section.

12. Transfers and Right of First Refusal

No Partner may transfer any portion of their Partnership Interest, except as permitted under the Withdrawal, Death, or Disability Section. Transfers must first be offered on the same terms to the Partnership, and if declined within 30 days, to the remaining Partner(s), pro rata or as otherwise agreed.

Transfers to Immediate Family (as defined in Exhibit A) or estate-planning trusts are allowed only if the transferee signs and agrees to this Agreement. Partial transfers require unanimous consent; without it, only economic rights (distributions and buyout payments) transfer, with no management, voting, or information rights. Transfers by or on behalf of an Affected Party are subject to these restrictions and the Buyout Section. Unauthorized transfers are void and treated as buyout events under the Buyout Section.

13. Liabilities and Indemnification

Partners are jointly and severally liable for Partnership obligations. Each Partner must indemnify the others for losses from fraud, gross negligence, unauthorized acts, or breaches of the Confidentiality, Intellectual Property, and Restrictive Covenants Section; but not for ordinary negligence, good-faith errors, or authorized actions. A Partner whose unauthorized acts cause a lawsuit must cover the defense costs of the Partnership and the other Partners. The Partnership shall indemnify Partners for liabilities incurred in good faith and within their authority, except in cases of fraud, gross negligence, or willful misconduct. Tax-related indemnities are covered by the Records, Accounting, and Audit Rights Section.

14. Insurance

The Partnership shall maintain general liability insurance and such other commercially reasonable coverages (e.g., property, professional liability, key-person) as determined by majority vote, unless otherwise designated as a Major Decision.

15. Records, Accounting, and Audit Rights

The Partnership shall keep accurate books at its principal office, open to all Partners. Annual financial statements shall be prepared by a CPA. The fiscal year ends on . A Partnership Representative shall be designated under IRS rules to interact with tax authorities. Each Partner shall have a capital account maintained in accordance with Section 704(b) of the Internal Revenue Code.

Each Partner shall indemnify the Partnership and the others for taxes, penalties, interest, and reasonable fees arising from (i) failing to provide accurate or timely tax information, (ii) misreporting Schedule K-1 items, or (iii) grossly negligent, willful, or unauthorized tax actions. The Partnership Representative may not settle or make material tax elections without unanimous written consent.

16. Employees and Contractors

No Partner may hire or terminate employees or contractors, or set compensation exceeding $ annually, without unanimous consent.

17. Dissolution and Winding Up

The Partnership dissolves upon unanimous agreement, bankruptcy, court order, or withdrawal without continuation within 90 days. Assets distributed: (i) debts to third parties, (ii) Partner loans, (iii) capital contributions, (iv) remainder per ownership. All Partners, and their estates or representatives, remain bound during and after dissolution by the Confidentiality, Intellectual Property, and Restrictive Covenants section.

18. Confidentiality, Intellectual Property, and Restrictive Covenants

Confidential information must remain confidential during the Agreement and for 18 months after withdrawal, buyout, or dissolution, except that trade secrets remain protected as long as they qualify under law. Intellectual property created in the course of business is owned by the Partnership. Each Partner retains intellectual property developed before the Effective Date unless contributed in writing.

The Partners shall not divert business opportunities during the Partnership. No Partner may solicit Partnership clients or employees for competing work following withdrawal, unless otherwise unanimously agreed. Passive ownership of up to % of publicly traded securities in a competitor is allowed.

19. Deadlock Resolution

If the Partners cannot resolve a Major Decision within 60 days, any Partner may initiate a buy-sell by offering to purchase the other Partner(s)’ Interest at a stated price and terms. The other Partner(s) then have 30 days to elect either to sell on those terms or to buy the offering Partner’s Interest on the same terms. Closing shall occur within 90 days, and the purchasing Partner must demonstrate adequate financing. If no Partner elects or is able to perform, the Partnership shall be dissolved and wound up under the Dissolution and Winding Up section.

20. Dispute Resolution and Governing Law

(i) Governing Law. This Agreement is governed by the laws of the State of , without regard to conflict-of-law rules. Mandatory partnership, tax, or business-practice laws of the jurisdiction in which the Partnership’s principal office is located apply only to the extent required by law.

(ii) Mediation. The Partners shall first attempt in good faith to resolve any dispute, claim, or controversy arising out of or relating to this Agreement or the Partnership (a “Dispute”) through direct discussion. If unresolved after 30 days, the Dispute shall proceed to mediation before a mutually agreed mediator; if none is chosen within 10 days, one shall be appointed by AAA, JAMS, or a comparable local bar service.

(iii) Arbitration. If mediation does not resolve the Dispute within 30 days after the mediator’s appointment, and arbitration is not prohibited by applicable law, the Dispute shall be finally resolved by binding arbitration administered by the AAA under its Commercial Arbitration Rules or, if AAA is unavailable or declines to administer, by JAMS. The seat of arbitration shall be , with hearings conducted in ,  unless otherwise agreed. The arbitrator’s award shall be final and binding, and judgment on the award may be entered in any court of competent jurisdiction. 

(iv) Injunctive Relief, Fees, and Costs. Either Partner may seek temporary or injunctive relief in a court of competent jurisdiction to protect Partnership rights or prevent irreparable harm, without waiving arbitration of remaining issues. The substantially prevailing Partner shall recover reasonable attorneys’ fees and costs unless prohibited by law. Mediation and arbitration costs are shared equally unless reallocated by the arbitrator or court.

(v) Multi-Partner and Joinder. All Partners and signatories to this Agreement are bound to a single arbitration for any Dispute arising from or relating to this Agreement or the Partnership. The arbitrator may consolidate related claims and join signatory Partners where no Partner’s right to a fair hearing is prejudiced. No Partner may bring a separate proceeding arising from the same or related facts without consent of all Partners or order of the arbitrator.

21. Amendments, Entire Agreement, and Counterparts

This entire Agreement, including all Exhibits, is the complete and exclusive statement of the Partners understanding and supersedes all prior or contemporaneous agreements, oral or written. It may be amended only by a written instrument signed by the Partners. (ii) This Agreement may be executed in counterparts, each deemed an original, together forming one binding instrument.

22. Severability, Waiver, and Survival

(i) If any provision is held invalid, the rest remains effective. Failure to enforce a provision does not waive it. Obligations that naturally continue after termination, including confidentiality, indemnification, restrictive covenants, buyout obligations, dispute resolution, insurance, guarantee sharing, and recordkeeping obligations survive withdrawal, dissolution, or termination. (ii) During any dispute, mediation, or arbitration, all Partners shall continue performing undisputed obligations under this Agreement, maintain Partnership operations in good faith, preserve Partnership assets, and comply with confidentiality, non-solicitation, and restrictive-covenant provisions, unless otherwise agreed in writing or ordered by the arbitrator or a court of competent jurisdiction.

23. Force Majeure

No Partner is liable for delays or failures (except buyout installments, tax distributions, or third-party debt) caused by events beyond its reasonable control, including but not limited to, natural disasters, pandemics, labor disputes, supply chain failures, war, or government action. During such an event, the affected Partner’s obligations are suspended and deadlines extended. If the event continues for more than  consecutive days and makes it impracticable for the Partner(s) to continue operating the Partnership, either Partner can end the Partnership under the rules listed in the Dissolution and Winding Up Section.

24. Notices and Contact Information

All notices, consents, requests, demands, and other communications under this Agreement shall be sent to the following addresses. Any Partner may update its notice details by Written Notice to the other (as set forth in the attached Exhibit A: Definitions). Phone numbers are provided for convenience only and is not valid for delivery of formal notices.

To Partner 1 - Name: 

Address: 

Email:  Phone: 

To Partner 2 - Name: 

Address: 

Email:  Phone: 

25. Exhibits and Attachments

For purposes of this Agreement, the term “Exhibit” means any document identified as an Exhibit or Attachment and signed or initialed by the Partners. All Exhibits are incorporated into and made part of this Agreement. In the event of a conflict between this Agreement and any Exhibit, this Agreement shall control unless the Exhibit expressly states otherwise and is signed by the Partners. Any other documents provided or attached are for reference only and do not form part of this Agreement. Incorporated Exhibits may include:

• Exhibit A: Definitions
• Exhibit B: 

26. Miscellaneous

(i) Interpretation. Headings are for convenience only and do not affect interpretation. References to “Either Partner,” “Neither Partner,” or “Both Partners” mean the principal contracting entities identified in the first paragraph of this Agreement, together with any additional named person or entity that has executed this Agreement, each of whom is deemed a Partner and Principal Party unless expressly stated otherwise. Individuals or entities associated with the Partnership who have not executed this Agreement are not Partners or Principal Parties and have no rights or obligations under it. Words of any gender include all genders, and words in the singular include the plural and vice versa. References to “they,” “them,” or “their” shall be interpreted as referring to the Partner, the Partners, the Partnership, or the Affected Party, as the context requires. 

(ii) Authority. Each Partner represents that it has full authority to enter into this Agreement and that no other consent or approval is required.

(iii) Assignment. No Partner may assign rights or duties except as permitted herein.

(iv) Successors and Assigns. This Agreement binds and benefits the Partners and their respective heirs, executors, administrators, and permitted assigns.

(v) Further Assurances. Partners shall execute and deliver additional documents as reasonably required to carry out this Agreement.

(vi) Cumulative Remedies. Rights and remedies under this Agreement are cumulative and not exclusive of those provided by law.

(vii) No Third-Party Beneficiaries. This Agreement benefits only the Partners and their permitted successors and assigns.

(viii) No Partnership by Estoppel. Nothing in this Agreement creates a partnership, joint venture, or agency relationship beyond its express terms.

(ix) Set-Off. The Partnership may offset debts owed by a Partner against distributions otherwise payable.

(x) Precedence. If this Agreement conflicts with any other agreement between the Partners, this Agreement controls.

(xi) Expenses. Each Partner shall bear its own legal and accounting costs relating to this Agreement, unless otherwise agreed in writing.

(xii) Signatures. The Partners agree to be bound by this Agreement. Electronic or scanned signatures are deemed originals and fully enforceable.