Partnership Contract Template

This Partnership Agreement ("Agreement") is made and entered into on  (the "Effective Date") by and between  (the "Partner 1") and  (the "Partner 2"). Each of Partner 1 and Partner 2 may be referred to individually as a "Partner" or a "Party", and together as the "Partners" or the "Parties".

1. Formation and Name

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

 General Partnership: Each Partner may be personally liable for debts and obligations of the Partnership. 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 Place of Business

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 place of business of the Partnership shall be located at the following address:

, or at such other location as the Partners may designate by unanimous written agreement.

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 (ii). Any payment or contribution required under this Agreement that is not made when due shall accrue interest at a rate of the greater of prime plus % per annum, or 10%, until paid in full.

(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. If a conflict of interest arises, the affected Partner shall promptly provide full written disclosure to the other Partner(s) and abstain from decisions directly affected by the conflict unless unanimously permitted to participate.

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 Place of Business Section (2).

7. Banking and Authority

The Partnership shall maintain all bank and financial accounts solely in its legal name, separate from the personal accounts of any Partner. All Partnership income shall be deposited promptly into these accounts, and all expenses shall be paid directly from them, unless otherwise approved in writing.

No Partner may deposit, withdraw, or transfer Partnership funds except as expressly authorized under this Agreement. Authorized signers for checks, electronic transfers, and withdrawals shall be designated by unanimous written agreement of the Partners. The Partners may establish dual-signature or approval requirements for transactions exceeding $ or as otherwise agreed in writing.

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. All reimbursable expenses must be supported by receipts or invoices consistent with IRS Section 274 documentation standards. 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 (4). No Partner shall withdraw, disburse, or advance Partnership funds for personal or non-Partnership purposes except as expressly authorized by this Agreement or approved in writing by all Partners.

9. Admission and Expulsion of Partners

The admission of a new Partner requires the unanimous written consent of all existing Partners. A Partner may be expelled for fraud, theft, willful breach of this Agreement, failure to meet a capital call, incurring unauthorized debt, or failing to cure a material default within 30 days after Written Notice (as defined in Exhibit A: Definitions). A Partner subject to potential expulsion shall receive Written Notice of the specific grounds and an opportunity to cure within 30 days, unless the conduct involves fraud, willful misconduct, or acts causing material harm to the Partnership, in which case expulsion may be immediate. The Partner under consideration shall not vote on the expulsion decision. Expulsion requires the unanimous approval of all remaining Partners and is subject to the Buyout Section (10) for valuation and payment of the expelled Partner’s Interest.

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. If the two appointed appraisers fail to select a third within 15 days, either Partner may request that the appointment be made by a court of competent jurisdiction or a recognized commercial arbitration service. The cost of all appraisals shall be shared equally by the Partners, unless the third appraiser determines that one Partner’s conduct unreasonably increased such costs, in which case the excess may be allocated accordingly.

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

(i) Withdrawal. A Partner wishing to withdraw must provide Written Notice at least 30 days before the intended effective date of withdrawal, unless unanimously waived by the remaining Partner(s). Following a Partner’s withdrawal, the withdrawing Partner shall be bought out in accordance with the Buyout Section (10). The remaining Partner(s) may continue Partnership operations in the ordinary course during the buyout process, limited to preserving business value and fulfilling existing obligations.

(ii) Temporary Incapacity. A Partner is considered temporarily incapacitated if, due to illness, injury, or other medical condition, they are unable to perform substantially all material duties for more than 90 consecutive days or 120 cumulative days in any 12-month period, as certified by a licensed physician. During any temporary incapacity, the remaining Partner(s) shall continue to manage the Partnership and allocate the affected Partner’s duties as necessary, while consulting the affected Partner on material business matters where reasonably possible.

(iii) Disputed Incapacity. If the extent or duration of incapacity is disputed, a neutral physician shall be jointly selected by the remaining Partner(s) and the Affected Party. If no agreement is reached within 30 days, one shall be appointed by a court or recognized medical arbitration body.

(iv) Permanent Disability, Death, and Buyout. If the condition is expected to prevent the Partner’s return to active participation within an additional 6 months, the Partner shall be deemed permanently disabled, subject to medical certification. Following a Partner’s death or permanent incapacity, that Partner or the Affected Party (as defined in Exhibit A: Definitions) shall be bought out in accordance with the Buyout Section (10). The remaining Partner(s) may continue Partnership operations in the ordinary course during the buyout process, limited to preserving business value and fulfilling existing obligations.

(v) Rights of the Affected Party. The Affected Party holds only economic rights, with no management or voting rights, unless unanimously admitted as a Partner. Until the buyout is complete, the Affected Party remains bound by cooperation obligations and the Confidentiality, Intellectual Property, and Restrictive Covenants Section (19).

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 (16). The indemnifying Partner’s obligations under this Section shall survive that Partner’s withdrawal, expulsion, dissolution, or termination of this Agreement.

14. Insurance

The Partnership shall obtain and maintain commercial general liability insurance and any other coverages that are reasonable and customary for its size, industry, and operations, including property, professional liability, workers’ compensation, and key-person insurance if applicable. Coverage levels shall be not less than $500,000 per occurrence, unless unanimously agreed otherwise in writing. The Partnership shall review insurance annually and adjust coverage as reasonably necessary to reflect growth, contracts, or legal requirements. All policies shall name the Partnership as the primary insured and, where commercially reasonable, list the Partners as additional insureds. Each Partner shall cooperate in good faith to maintain coverage, provide required information, and execute any documents needed for underwriting or renewal.

Failure to maintain required insurance constitutes a material breach of this Agreement.

15. 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 (18). The unaffected Partner(s) shall use commercially reasonable efforts to continue operations and mitigate damages or delays caused by the Force Majeure event.

16. Records, Accounting, and Audit Rights

(i) Recordkeeping. The Partnership shall keep accurate and complete books and records at its principal office, open to all Partners during normal business hours. Annual financial statements shall be prepared by a CPA. The fiscal year ends on .

(ii) Capital Accounts and Tax Filings. Each Partner shall have a capital account maintained in accordance with Section 704(b) of the Internal Revenue Code. The Partnership shall prepare and file all required federal and state tax returns, including IRS Form 1065, and issue Schedule K-1 statements to each Partner annually. Each Partner shall provide all information necessary for timely and accurate filing.

(iii) Partnership Representative. A Partnership Representative shall be designated under IRS rules to interact with tax authorities and may not settle or make material tax elections without unanimous written consent.

(iv) Audit Cooperation. Each Partner shall cooperate fully in any Partnership tax audit or inquiry, including timely providing information or documentation requested by the Partnership Representative or tax authorities.

(v) Tax Indemnity. Each Partner shall indemnify the Partnership and the others for taxes, penalties, interest, and reasonable fees arising from: (a) failing to provide accurate or timely tax information; (b) misreporting Schedule K-1 items; or (c) grossly negligent, willful, or unauthorized tax actions.

(vi) Record Retention. The Partnership shall retain financial, tax, and business records for at least 7 years after the withdrawal or dissolution of the Partnership.

(vii) Former Partner Access. A former Partner may, for 12 months following withdrawal or buyout, access Partnership records reasonably necessary to verify payments or distributions, provided confidentiality is maintained and inspection occurs during normal business hours upon reasonable notice.

17. Employees and Contractors

No Partner may hire or terminate any employee or contractor, or set or materially change compensation, benefits, or engagement terms exceeding $ annually, without unanimous written consent of the Partners. All employees and contractors shall be engaged in the name of the Partnership, and no Partner may engage personnel personally for Partnership work without written approval. The Partnership shall comply with all applicable employment, tax, and labor laws. Each Partner shall ensure that no employee or contractor is promised ownership, equity, or profit participation without a written agreement signed by all Partners.

18. Dissolution and Winding Up

The Partnership shall dissolve upon unanimous written agreement of the Partners, bankruptcy, court order, or a Partner’s withdrawal without continuation within 90 days.

Upon dissolution, the Partners shall promptly begin winding up the Partnership’s affairs in an orderly manner. This includes collecting receivables, paying or settling all debts and obligations, liquidating assets as necessary, filing final tax returns, and submitting any notices or reports required by law. During the winding up, the Partners shall cooperate in good faith to preserve business value, maintain accurate records, and allocate responsibilities for accounting, contract termination, and asset disposition.

Partnership assets shall be distributed in the following order of priority:

(i) debts and obligations to third parties;

(ii) repayment of Partner loans;

(iii) return of capital contributions; and

(iv) any remaining balance distributed according to ownership interests.

Any disputes concerning the winding up process shall be resolved under the Dispute Resolution and Governing Law section before initiating court proceedings. All Partners, and their estates or legal representatives, remain bound during and after dissolution by the Confidentiality, Intellectual Property, and Restrictive Covenants Section (19).

19. Confidentiality, Intellectual Property, and Restrictive Covenants

(i) Confidentiality. Each Partner shall keep all Partnership information confidential during the term of this Agreement and for 18 months following withdrawal, buyout, or dissolution, except that trade secrets remain protected for as long as they qualify under applicable law.

(ii) Intellectual Property. All intellectual property, materials, and work product created in the course of Partnership business are owned by the Partnership unless otherwise agreed in writing. Each Partner retains ownership of intellectual property developed independently before the Effective Date unless contributed in writing to the Partnership.

(iii) Business Opportunities and Non-Solicitation. Partners shall not divert or exploit Partnership opportunities for personal gain during the term of the Partnership. After withdrawal, no Partner may solicit or provide competing services to Partnership clients or employees for 12 months, unless otherwise unanimously agreed in writing.

(iv) Permitted Investments. Passive ownership of up to % of publicly traded securities in a competitor is permitted, provided such ownership does not grant control or influence over that entity.

20. Deadlock Resolution

If the Partners cannot resolve a Major Decision within 60 days, either Partner may initiate a buy-sell offer stating a proposed price and terms for the other Partner’s Interest. The receiving Partner shall 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 60 days after such election. The purchasing Partner must demonstrate adequate financing before closing. If the Partners cannot resolve the matter and neither elects to buy the other’s Interest, the Partnership shall proceed to dissolution under the Dissolution and Dissolution and Winding Up Section (18).

21. Dispute Resolution and Governing Law

This Agreement shall be 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.

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 a Dispute cannot be resolved through direct discussion within 30 days, the Partners shall participate in non-binding mediation before a mutually agreed mediator located in , . Mediation costs, including mediator and administrative fees, shall be borne equally by the Partners unless the mediator determines that one Partner’s conduct unreasonably increased the cost or duration of mediation, in which case costs may be reallocated accordingly.

If mediation fails to resolve the Dispute within 30 days after the mediator’s appointment, either Partner may file suit in the state or federal courts located in , , which shall have exclusive jurisdiction. Each Partner irrevocably submits to that venue and waives any objection based on inconvenience or improper forum.

Either Partner may seek temporary or injunctive relief from any court of competent jurisdiction to protect Partnership assets or prevent irreparable harm. The substantially prevailing Partner in any action or proceeding shall recover reasonable attorneys’ fees and costs, unless prohibited by law. During any Dispute, the Partners shall continue performing undisputed obligations and maintain Partnership operations in good faith.

22. 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 Line 1: 

Address Line 2: 

Email:  Phone: 

To Partner 2

Name: 

Address Line 1: 

Address Line 2: 

Email:  Phone: 

23. Exhibits

All exhibits, schedules, attachments, or other documents referenced in a previous Section, attached, or listed below are deemed incorporated and form part of this Agreement ("Exhibits"). An Exhibit is binding only if signed or initialed by the Partners, unless they agree in writing that signatures or initials are not required for that Exhibit. If there is any conflict between this Agreement and an Exhibit, this Agreement controls unless the Exhibit (a) expressly states the Section it overrides, (b) supplements or clarifies a specific Section on the same subject matter without contradicting it. The inclusion or listing of an Exhibit does not make it binding unless executed in accordance with this Section.

• Exhibit A: Definitions
• 

24. Miscellaneous

(i) Interpretation. Headings are for convenience only and do not affect interpretation. Words in the singular include the plural where the context allows. References to persons include entities and vice versa. As used in this Agreement, the term "including" means "including, but not limited to", and shall not limit the generality of the preceding language. 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. This Agreement shall be interpreted according to its plain meaning and shall not be construed against either Party as the drafter.

(ii) Partner References 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. 

(iii) Fallback Definitions. To preserve enforceability and interpretive consistency, if any defined term in this Agreement or its Exhibits, such as "Partner", "Partnership Interest", "Capital Contribution", "Major Decision", "Fair Market Value", or any similar defined term, is changed, replaced, or omitted in any draft, amendment, or executed version, those terms shall be interpreted consistently with their plain meaning and context to preserve the Parties’ rights and obligations as originally intended. References to specific Exhibits (including Exhibit A, Exhibit B, or any attachment) include any equivalent exhibit, document, material, schedule, or attachment, regardless of title, numbering, or format, that defines or governs the same subject matter for interpretive purposes only.

(iv) Authority and Further Assurances. Each Partner represents that it has full authority to enter into this Agreement and that no other consent or approval is required. Each Partner shall execute and deliver additional documents and take reasonable actions as necessary to carry out the intent and purposes of this Agreement.

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

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

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

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

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

(x) Entire Agreement and Amendments. This Agreement, including all Exhibits, is the complete and exclusive statement of the Parties’ agreement and supersedes all prior or contemporaneous agreements, oral or written. It may be amended only by a written instrument signed by the Partners. The Partners may also adopt written operating or management policies consistent with this Agreement. Any such policies, once signed by both Partners, are incorporated by reference and are binding without requiring a formal amendment.

(xi) Execution and Signatures. This Agreement may be executed in counterparts, each deemed an original, together forming one binding instrument. Electronic or scanned signatures are valid and enforceable.

(xii) Severability and Waiver. 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, and recordkeeping, survive withdrawal, dissolution, or termination.

(xiii) Continuing Obligations During Dispute. During any dispute, mediation, or litigation, all Partners shall continue performing undisputed obligations, maintain Partnership operations in good faith, preserve Partnership assets, and comply with confidentiality and restrictive-covenant obligations, unless otherwise agreed in writing or ordered by a court.