Partnership Agreement Considerations

Here’s a quick list of the major areas that most partnership agreements cover:

Name of the partnership. One of the first things you must do is agree on a name for your partnership. If you use a fictitious name, you must make sure that the name isn’t already being used.

Contributions to the partnership. It’s critical that you and your partners work out and record who’s going to contribute what: cash, property or services. Also define exactly what ownership percentage each partner will have.

Allocation of profits, losses and draws. Will profits and losses be allocated in proportion to a partner’s percentage interest in the business? And will each partner be entitled to a regular draw (a withdrawal of allocated profits from the business) or will all profits be distributed at the end of each year?

Partners’ authority. Without a written agreement to the contrary, any partner can bind the partnership without the consent of the other partners. If you want one or all of the partners to obtain the others’ consent before binding the partnership, you must make this clear in your partnership agreement.