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Partnership Agreement


This Partnership Agreement is entered into and effective as of . The partners are:

Alternate Selection: [number of partners]
Label Contract Text
two

, and  (individually and collectively referred to as the Partners).

three

, , and , (individually and collectively referred to as the Partner(s)).

four

, , , and , (individually and collectively referred to as the Partner(s)).

five

, , , ,  and  (individually and collectively referred to as the Partner(s)).

six

, , , , , and  (individually and collectively referred to as the Partner(s)).

The name of the partnership shall be .

The purpose of the partnership is: .

Alternate Selection: [payment of interest on contributed capital]
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no interest paid

No partner shall be entitled to receive interest on any capital contribution.

interest to be paid

Each partner shall be entitled to interest on his or her capital contribution. This interest shall be payable annually at a rate agreed to in writing by the partnership.

Alternate Selection: [distribution of profits and losses]
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equal distribution

The partners will share all profits and losses of the partnership equally.

unequal distribution

The partnership's profits and losses shall be shared by the partners in the same proportions as their initial contributions of capital bear to each other as set forth in this agreement.

Alternate Selection: [payment of salaries]
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No Salaries

No partner will be paid any salary, except those that may in the future be decided on by unanimous written consent of all partners.

Salaries Paid

Partners can be paid reasonable salaries for work they perform in the partnership business.

Alternate Selection: [voting decisions]
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Unanimous

All partnership decisions must be made by the unanimous agreement of all partners.

Majority 

All partnership decisions shall be determined by majority vote, except as otherwise provided in this Agreement.

Majority Based on Fixed Percentage

All partnership decisions shall be determined by majority vote, except as otherwise provided in this Agreement. The partners shall have the following percentages of voting power: 

Maintenance of Records. Proper and complete books of account of the partnership business shall be kept at the partnership's principal place of business and shall be open to inspection by any of the partners or their representative at any reasonable time during business hours.

Prohibition Against Commingling. All partnership funds shall be deposited only in bank accounts bearing the partnership name.

Multiple Selection: [optional financial clauses]
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Periodic Accountings

Periodic Accountings. A full and complete account of the books of the partnership shall be made to the partners on a[n]  basis.

Accounting on Request

Accounting on Request by a Partner. Accountings of any aspect of partnership business shall be made upon written request by any partner.

Accountant does Accounting

Accountant to Determine Profits and Losses. The partnership's net profit or net loss for each fiscal year shall be determined as soon as practicable after the close of that fiscal year by an accountant chosen by the partners.

Alternate Selection: [external business activity]
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Outside Activity Restricted

As long as any partner is a member of the partnership, he or she shall devote his or her full work time and energies to the conduct of partnership business, and shall not be actively engaged in the conduct of any other business for compensation or a share in profits as an employee, officer, agent, proprietor, partner, or stockholder. This prohibition shall not prevent him or her from being a passive investor in any enterprise, if he or she is not actively engaged in its business and does not exercise control over it. Neither the partnership nor any other partner shall have any right to any income or profit derived from any such passive investment.

No Direct Competition

Any partner may be engaged in one or more other businesses as well as the business of the partnership, but only to the extent that this activity does not directly and materially interfere with the business of the partnership and does not conflict with the time commitments and other obligations of that partner to the partnership under this Agreement. Neither the partnership nor any other partner shall have any right to any income or profit derived by a partner from any business activity permitted under this section.

No Restrictions

It is understood and agreed that each partner may engage in other businesses, including enterprises in competition with the partnership. The partners need not offer any business opportunities to the partnership, but may take advantage of those opportunities for their own accounts or for the accounts of other partnerships or enterprises with which they are associated. Neither the partnership nor any other partner shall have any right to any income or profit derived by a partner from any enterprise or opportunity permitted by this section.

Specific Activities Permitted

The list below specifies business activities that each partner plans or may do outside of the partnership business. Each partner is expressly authorized to engage in these activities if he or she so desires:

Multiple Selection: [intangible property ownership]
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Ownership of IP
Multiple Selection: [intangibles]
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Trade Secrets

All trade secrets acquired or developed by the partnership, including customer lists and sources of supplies, will be owned and controlled by the partnership.

Patents

Any ideas, inventions, or designs, acquired or developed by one or more partners in the course of partnership business and pertaining to partnership business that are the subject of an application for a patent shall be partnership property.

Copyrights

All copyrighted materials created, prepared, or acquired in the partnership name are, and shall remain, partnership property. The partnership shall also own all copyrighted works created by the partners during and in the course of partnership business.

Trade Name/Trademark

The partnership trade name and trademarks and service marks (and associated good will) shall be partnership property. In the event of the departure of a partner and/or dissolution of the partnership, control and ownership of the partnership business name shall be determined pursuant to this Agreement.

Admission of a new partner shall not cause dissolution of the underlying partnership business, which will be continued by the new partnership entity.

Sale to Partnership or Partners at Their Option. If any partner leaves the partnership, for whatever reason, whether he or she quits, withdraws, is expelled, retires, becomes mentally or physically incapacitated or unable to function as a partner, or dies, or if the partner attempts to or is ordered to transfer his or her interest, whether voluntarily or involuntarily, he or she, or his or her estate, shall be obligated to sell his or her interest in the partnership to the remaining partner or partners, who have the option, but not the obligation, to buy that interest.

Refusal of the Remaining Partners to Buy. If the remaining partner or partners do not purchase the departing partner's share of the business under the terms provided in this Agreement, within  days, the entire business of the partnership shall be put up for sale and listed with the appropriate sales agencies, agents, or brokers.

Multiple Selection: [right of refusal]
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RIght of Refusal

The Right of First Refusal Upon Offer From Outside. Notwithstanding any other provision in this Agreement, if a partner receives a bona fide, legitimate offer, whether or not solicited by him or

her, from a person not a partner, to purchase all of his or her interest in the partnership, and if the partner receiving the offer is willing to accept it, he or she shall give written notice of the amount and terms of the offer, the identity of the proposed buyer, and his or her willingness to accept the offer to each of the other partners. The other partner or partners shall have the option, within  days after the notice is given, to purchase that partner's interest on the same terms as those contained in the offer. If the partner or partners do not purchase the interest, the partner may accept the outside person's offer.

Alternate Selection: [valuation of partnership]
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Asset-Valuation

The value of the partnership shall be made by determining the net worth of the partnership as of the date a partner leaves, for any reason. Net worth is defined as the market value, as of that date, of the following assets:

  • All tangible property, real or personal, owned by the business;
  • All the liquid assets owned by the business, including cash on hand, bank deposits and CDs, or other monies;
  • All earned but unbilled fees;
  • All money presently earned for work in progress;
  • Less the total amount of all debts owed by the business.
Post-Departure Appraisal

The value of the partnership shall be determined by an independent appraisal conducted by an appraiser chosen, if possible, by unanimous vote. If all partners cannot agree on an appraiser, the departing partner and the remaining partners shall each select an independent appraiser. If the two selected appraisers are unable to agree on the fair market value of the partnership business, then the two appraisers shall mutually select a third appraiser to determine the fair market value. The partnership and the departing partner shall share the cost of the appraisal equally.

Capitalization of Earnings

The value of the partnership shall be determined as follows:

Hybrid Valuation
Alternate Selection: [timing of payment to departing partner]
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Equal Monthly Payments

Whenever the partnership is obligated or chooses to purchase a partner's interest in the partnership, it shall pay for that interest by promissory note of the partnership. Any promissory note shall be dated as of the effective date of the purchase, shall mature in not more than years, and shall be payable in equal installments that come due monthly. The first payment shall be made  days after the date of the promissory note. 

Lump Sum and Monthly Payments

Whenever the partnership is obligated to, or chooses to, purchase a partner's interest in the partnership, it shall pay for that interest as follows:

First: It shall pay the departing partner  percent of the payment for the partnership interest within  days of determining the partnership valuation.

Second: After that initial payment, it shall pay the balance owed by promissory note of the partnership. Any promissory note shall be dated as of the effective date of the purchase, shall mature in not more than  years, shall be payable in equal installments that come due monthly, and may, at the partnership's option, be subordinated to existing and future debts to banks and other institutional lenders for money borrowed. The first payment shall be made  days after the date of the promissory note.

Cash Payment

Whenever the partnership is obligated or chooses to purchase a partner's interest in the partnership, it shall pay for that interest in cash within  days of determining the partnership valuation.

From the date of any of the following events, a partner shall be considered as a seller to the partnership of his or her interest in the partnership as set forth in this Agreement. If a partner is expelled for one of the reasons below, the partnership shall not be dissolved, but shall continue to function without interruption.

Upon Partner's Withdrawal. In the case of a partner's permanent disability, retirement, voluntary withdrawal, expulsion from the partnership, or death, the partnership shall not dissolve or terminate, but its business shall continue without interruption and without any break in continuity. On the disability, retirement, withdrawal, expulsion, or death of any partner, the others shall not liquidate or wind up the affairs of the partnership, but shall continue to conduct a partnership under the terms of this Agreement.

Partnership Continues Upon Bankruptcy of Partner. Notwithstanding any other provision of this Agreement, a partner shall cease to be a partner and shall have no interest in common with the remaining partners or in partnership property when the partner does any of the following:

  • Obtains or becomes subject to an order of relief under the Bankruptcy Code,
  • Obtains or becomes subject to an order or decree of insolvency under state law,
  • Makes an assignment for the benefit of creditors,
  • Consents to or accepts the appointment of a receiver or trustee to any substantial part of his or her assets that is not vacated within 90 days, or
  • Consents to or accepts an attachment or execution of any substantial part of his or her assets that is not released within 90 days.
Multiple Selection: [control of trade name]
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Control of Trade Name and Trademarks

Partnership Continues to Own Name.  The partnership trade name and trademarks and service marks are owned by the partnership. Should any partner cease to be a member of the partnership, the partnership shall continue to retain exclusive ownership and exclusive right to use the partnership trade name and trademarks and service marks.

Multiple Selection
  Contract Text
private dispute resolution
Alternate Selection
Label Contract Text
mediation only

Mediation. If a dispute arises under or relating to this Agreement, the parties will try in good faith to settle it through mediation conducted by a mediator to be mutually selected. The parties will share the costs of the mediator equally. Each party will cooperate fully and fairly with the mediator and will attempt to reach a mutually satisfactory compromise to the dispute. If the dispute is not resolved within 30 days after it is referred to the mediator, either party may take the matter to court.

mediation to arbitration (no litigation)

Mediation and Arbitration. If a dispute arises under or relating to this Agreement, the parties will try in good faith to settle it through mediation conducted by a mediator to be mutually selected. The parties will share the costs of the mediator equally. Each party will cooperate fully and fairly with the mediator and will attempt to reach a mutually satisfactory compromise to the dispute. If the dispute is not resolved within 30 days after it is referred to the mediator, it will be settled by binding arbitration by an arbitrator to be mutually selected. Judgment on the arbitration award may be entered in any court that has jurisdiction over the matter.

arbitration (no litigation)

Arbitration. All claims and disputes arising under or relating to this Agreement are to be settled by binding arbitration by an arbitrator to be mutually selected. Judgment on the arbitration award may be entered in any court that has jurisdiction over the matter. 

This is the entire agreement between the partners. It replaces and supersedes any and all oral agreements between the partners, as well as any prior writings. This Agreement may not be amended except in a writing as provided for in this Agreement.

This agreement binds and benefits the respective successors, inheritors, assigns, and personal representatives of the partners, except to the extent of any contrary provision in the Agreement.

The failure to exercise any right provided in this Agreement shall not be a waiver of prior or subsequent rights.

This Agreement will be governed by and construed in accordance with the laws of the state of .

If any court determines that any provision of this Agreement is invalid or unenforceable, any invalidity or unenforceability will affect only that provision and will not make any other provision of this agreement invalid or unenforceable and shall be modified, amended, or limited only to the extent necessary to render it valid and enforceable.


Category: Business

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