What should I include in a business partnership agreement?

A business partnership agreement (also called a partnership agreement or operating agreement for LLCs) is the foundational document that governs how your partnership operates, how profits and losses are shared, and what happens when disputes arise or a partner leaves. Without one, your partnership is governed by your state's default partnership law, which may not match your intentions. ^[1][2] Essential provisions to include: 1. Basic information - Name and principal place of business of the partnership - Date of formation - Names and addresses of all partners - Purpose/nature of the business - Duration (indefinite or fixed term) **2. Capital contributions ^[1] - What each partner is contributing (cash, property, services, intellectual property) - Dollar value assigned to non-cash contributions - Whether additional capital contributions may be required and the process for making them 3. Ownership percentages - Each partner's ownership interest (can be different from capital contribution ratios) 4. Profit and loss allocation - How profits and losses are divided (by ownership percentage or different formula) - When and how distributions will be made (e.g., quarterly, annually) - Treatment of partner salaries/draws before profit distributions 5. Management and decision-making ^[2] - Which partners manage day-to-day operations - What decisions require unanimous consent vs. majority vote - How to handle voting (by head or by ownership percentage) - Partner authority limits (e.g., what contracts/expenses require partner approval) 6. Partner roles and responsibilities - Time commitment expected of each partner - Specific duties and responsibilities - Restrictions on outside business activities or competition 7. Admission of new partners - Process and requirements for admitting new partners - How existing ownership interests are adjusted 8. Transfer of partnership interests - Restrictions on selling or transferring ownership interests to outsiders - Right of first refusal for other partners 9. Dissolution and exit provisions (critical) - What triggers dissolution (partner death, disability, departure, mutual agreement, etc.) - How to value partnership interests upon exit - Buyout procedures and payment terms - "Buy-sell" (shotgun) clauses for partner disputes 10. Dispute resolution - Process for resolving partner disputes (mediation → arbitration → litigation) - Choice of law and jurisdiction 11. Non-compete and confidentiality provisions** - Restrictions on partners competing against the business during and after the partnership *A partnership agreement should be drafted or reviewed by a business attorney. The cost of a well-drafted agreement is far less than the cost of partnership disputes litigated without one.*