General Partnership Agreement
This General Partnership Agreement (the "Agreement") is made as of [Start date of the partnership] between [Partner 1 full name], of [Partner 1 address] ("Partner 1"), and [Partner 2 full name], of [Partner 2 address] ("Partner 2"). Partner 1 and Partner 2 are each a "Partner" and together the "Partners". The Partners agree to carry on business together as a general partnership under the name [Partnership name] (the "Partnership") on the terms below.
1. Formation, Name and Purpose
The Partners form a general partnership under the partnership law of the State of [Governing law (state)] (the "Act"), effective on the date first written above. The Partnership’s name is [Partnership name], and the Partners shall file any assumed or fictitious business name registration the law requires. The purpose of the Partnership is: [Business purpose], and any lawful activity related to it that the Partners approve. The principal place of business is [Principal place of business], or such other place as the Partners agree. The Partnership continues until dissolved under Section 10. Each Partner represents that they are not subject to any agreement that would prevent them from performing this Agreement.
2. Capital Contributions
Each Partner shall contribute the following capital to the Partnership within thirty (30) days after the date of this Agreement: Partner 1, [Partner 1 capital contribution]; Partner 2, [Partner 2 capital contribution]. In addition, the Partners make the following non-cash contributions at the agreed values stated: [Non-cash contributions (equipment, property, or “None”)]. Property contributed becomes Partnership property, and the contributing Partner shall sign any title document needed to transfer it.
The Partnership shall maintain a separate capital account for each Partner, credited with the Partner’s contributions and share of profits and debited with distributions and share of losses. No Partner is required to contribute additional capital. If the Partners agree in writing that additional capital is needed, each shall contribute in proportion to their profit share unless they agree otherwise. No interest is paid on capital, and no Partner may withdraw capital without the other Partner’s written consent. A Partner who advances money to the Partnership beyond their capital contribution is a creditor of the Partnership for that amount, on terms the Partners agree in writing.
3. Profits, Losses and Distributions
Net profits and net losses of the Partnership for each fiscal year are shared as follows: Partner 1, [Partner 1 profit and loss share (%)] percent; Partner 2, [Partner 2 profit and loss share (%)] percent. Net profit and net loss are determined according to the Partnership’s books, kept on the same basis as its tax return, after deduction of all expenses including any draws under this Section, which are treated as guaranteed payments.
Each Partner who devotes the time commitment in Section 5 to the Partnership is entitled to a monthly draw of [Monthly draw per working partner (or $0)], payable on the last day of each month, which the Partners may change by written agreement and which shall be suspended by agreement if the Partnership’s cash does not permit it. Within ninety (90) days after the end of each fiscal year, the Partnership shall distribute to each Partner cash sufficient to pay the Partner’s estimated income and self-employment taxes on their share of Partnership income, to the extent cash is available after providing for reasonable reserves. All other distributions are made at such times and in such amounts as the Partners agree, in proportion to their profit shares.
4. Management and Authority
Each Partner has an equal voice in the management of the Partnership and is an agent of the Partnership for the purpose of its ordinary business. Decisions in the ordinary course of business may be made by either Partner. The following require the written consent of both Partners: any single expenditure, purchase, contract or borrowing exceeding [Spending or borrowing above this needs both partners]; signing any lease or any contract with a term longer than one (1) year; hiring or terminating any employee; lending Partnership funds or guaranteeing any obligation; selling, pledging or encumbering any Partnership asset outside the ordinary course; confessing a judgment or settling a claim; admitting a new partner; changing the nature of the business; and any act that would make it impossible to carry on the ordinary business of the Partnership.
A Partner who commits the Partnership in violation of this Section is liable to the other Partner for any resulting loss and shall indemnify the Partnership and the other Partner against it. Where the Partners cannot agree on a matter requiring both Partners’ consent, the status quo is maintained, and either Partner may invoke the dispute resolution procedure in Section 11.
5. Duties of the Partners
Each Partner shall devote the following time to the Partnership’s business: [Time commitment of each partner], and shall use their best efforts to advance its interests. Each Partner owes the Partnership and the other Partner a duty of loyalty and a duty of care, shall account to the Partnership for any benefit derived from Partnership business or property, and shall not, while a Partner, engage in any business that competes with the Partnership or take for themselves any opportunity that belongs to the Partnership without the other Partner’s written consent. Subject to those duties, a Partner may hold passive investments and engage in activities that do not compete with or interfere with the Partnership. Each Partner shall keep the Partnership’s confidential information, including customer lists, pricing and financial information, confidential during and after the term of the Partnership. Each Partner is responsible for their own income and self-employment taxes on their share of Partnership income.
6. Books, Accounts and Tax
The Partnership shall keep complete and accurate books of account at its principal place of business, on the cash or accrual basis as the Partners determine, and each Partner has full access to them at all times. The fiscal year ends on [Fiscal year end]. All Partnership funds shall be deposited in accounts in the Partnership’s name, and checks or transfers above the consent threshold in Section 4 require the approval of both Partners. Within sixty (60) days after the end of each fiscal year the Partnership shall prepare a balance sheet and income statement, and shall file a partnership information return and furnish each Partner a Schedule K-1. Partner 1 is designated the partnership representative for federal tax purposes and shall consult the other Partner on any tax matter.
7. Withdrawal and Expulsion
A Partner may withdraw from the Partnership on [Notice to withdraw (days)] days’ written notice to the other Partner. A Partner may be expelled by written notice of the other Partner if the Partner has committed a material breach of this Agreement and failed to cure it within thirty (30) days after written notice, has been convicted of a felony or of a crime involving dishonesty, has become bankrupt, or has engaged in conduct that makes it not reasonably practicable to carry on the business with that Partner. Withdrawal or expulsion does not dissolve the Partnership; the remaining Partner may continue the business and shall purchase the departing Partner’s interest under Section 9. A withdrawing Partner remains liable for Partnership obligations incurred before withdrawal and, for one (1) year after withdrawal, shall not solicit the Partnership’s customers or employees.
8. Death or Disability
If a Partner dies, the Partnership does not dissolve, and the remaining Partner may continue the business and shall purchase the deceased Partner’s interest from the estate under Section 9. If a Partner becomes unable, by reason of physical or mental illness or injury, to perform their duties for one hundred eighty (180) consecutive days, the other Partner may elect by written notice to treat the disability as a withdrawal and purchase the disabled Partner’s interest under Section 9. During a disability the draw of the disabled Partner continues for ninety (90) days and then ceases, and the Partner’s profit share continues until the purchase is completed. The Partners may maintain life or disability insurance on each other to fund a purchase under this Section.
9. Purchase of a Departing Partner’s Interest
The purchase price for a departing, expelled, disabled or deceased Partner’s interest is its fair market value as a going concern, without discount for lack of control or marketability, as agreed between the remaining Partner and the departing Partner or the estate within thirty (30) days after the event, or, failing agreement, as determined by an independent appraiser chosen by both sides or, failing that, by two appraisers each chosen by one side who together choose a third whose determination is binding. The cost of appraisal is borne equally. The purchase price is payable twenty percent (20%) within thirty (30) days after it is determined and the balance in equal monthly instalments over [Buyout paid over (months)] months with interest at the prime rate published in The Wall Street Journal on the closing date, evidenced by a promissory note secured by the purchased interest and personally guaranteed by the remaining Partner. The remaining Partner shall indemnify the departing Partner or the estate against Partnership liabilities arising after the closing and shall use reasonable efforts to have the departing Partner released from Partnership guarantees.
10. Dissolution and Winding Up
The Partnership dissolves on the written agreement of both Partners, on the sale of all or substantially all of its assets, on the departure of a Partner if the remaining Partner does not elect within ninety (90) days to continue the business and purchase the interest, or when required by law. On dissolution the Partners, or the surviving Partner, shall wind up the business, complete or assign contracts in progress, sell the assets on commercially reasonable terms, and apply the proceeds first to the Partnership’s debts including loans from Partners, then to reserves for contingent liabilities, then to the Partners in the amounts of their positive capital accounts, and then to the Partners in proportion to their profit shares. If the proceeds are insufficient to pay the Partnership’s debts, the Partners shall contribute the shortfall in proportion to their loss shares. Either Partner may purchase Partnership assets in the winding up at their appraised value.
11. Disputes; General
The Partners shall attempt to resolve any dispute concerning the Partnership or this Agreement by good-faith discussion, and if that fails within thirty (30) days, by mediation with a mediator agreed by both, the cost shared equally. If mediation does not resolve the dispute within sixty (60) days after a request, either Partner may bring an action in the courts of the State of [Governing law (state)], and the prevailing Partner is entitled to reasonable attorney fees and costs.
This Agreement is governed by the laws of the State of [Governing law (state)], and where it is silent the Act applies. It is the entire agreement between the Partners about the Partnership and supersedes all prior agreements. It may be amended only in a writing signed by both Partners. No Partner may assign their interest in the Partnership or admit a new partner without the other Partner’s written consent. It binds and benefits the Partners and their heirs, personal representatives and permitted assigns. If any provision is held unenforceable, the remainder continues in effect. Notices shall be in writing and delivered to the addresses above or to the email addresses in the execution record. This Agreement may be signed electronically and in counterparts, each of which is an original and all of which together are one instrument, and the electronic execution record, timestamps and document fingerprints kept by the signing platform are conclusive evidence of its execution.
Signatures
Partner 1 · Partner 2