To read this whole article, go to: www.sba.gov/community/blogs/six-elements-every-partnership-agreement-needs The U.S. Small Business Administration says a partnership agreement is not absolutely necessary. However, entering into a partnership agreement for a financial obligation for you and your partners can be avoided later, ranging from small legal headaches to serious financial problems in the future. Develop a plan to manage the interest of the partnership in the event of the death of one of the partners. The plan should contain a purchase/sale agreement specifying how the remaining partners offer to pay the deceased partner`s heirs for their property. Distribute how expenses and profits are shared among partners. A partnership is a Pass Through business unit, which means that the partnership does not pay taxes. Instead, profits and deductible expenses are distributed and reported to each partner to appear in their individual tax returns. www.sba.gov/content/model-partnership-agreement-0 The template can be downloaded from the SBA website or here. Determine how the partnership makes financial commitments and other business decisions.

Partners may also vote on decisions or one partner may be responsible for the final decisions after consultation with others. You can assign different rules for a large number of business functions. For example, you might need a partnership agreement to agree to borrow money, but give a single partner the power to recruit staff. Here are some of the common elements that you should include in a partnership agreement that must be signed in writing and by all partners. It`s not supposed to be an all-inclusive list, so contact your professional advisor. List the steps for resolving disputes between partners. Regardless of the number of contingencies covered by the Partnership Agreement, the partners could always reach a point where they could not agree. A mediation clause in the partnership contract can save a lot of money for legal invoices and complaints in the event of a problem between partners. A partnership agreement is a written agreement between partners in a general partnership, limited partnership or limited liability company that defines things such as the partners` investment, the distribution of profits and losses, each partner`s responsibilities for including new partners in the partnership, and how the partners can withdraw from the partnership. Develop a plan for the partnership`s day-to-day financial operations. Some points to cover are bank accounts, employee pay slips and partners` salaries. Also agree on how accounting is managed and where the main copy of the books is maintained.

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