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How to Write a Business Partnership Agreement?

  • Writer: lead India
    lead India
  • Aug 3, 2023
  • 4 min read

A business partnership agreement would establish some agreed-upon rules and processes which owners or the parties sign and acknowledge in case any negative situation occurs.

In other words, a business partnership agreement would protect all related parties, if things go sour. By acknowledging a clear set of rules and principles at the very outset of the partnership, partners exist on a level playing field developed by consensus and backed by law.


How to write a business partnership agreement?

A business partnership agreement should include all foreseeable issues related to various matters which may occur during the course of the business, including management issues.


The easiest way to prepare a partnership agreement would be to appoint an attorney or to find a suitable template according to your needs. If you’re writing your own partnership deed, it shall be helpful to find a template for the company which is according to your business demands.

A business partnership agreement ought to be logically structured and contain the following details.

  • Business generalities- the agreement would start with the name of the business, legal structure as well as the location of the business i.e. under which state’s law such business shall be governed.

  • Business operations- provides for the partnership purpose and an explanation should be given for the activities the business would or would not get engaged in, should be explained in the business experiment as well. And will not engage in.

  • Ownership stake- The percentage of the business which is owned by each of the partners should be mentioned in the business partnership including the rights and responsibilities of each of the partners.

  • Decision-making process- Outline how decisions are made the responsibility of each partner as well as how the decisions are to be made in the particular business will have been included in the agreement. Decisions such as who shall have the financial control of the company and who will approve the addition of new partners in the partnership will also have been included in the agreement.

  • Liability- If the business partnership is set up as an LLC, the business partnership agreement would have to limit the liability which each partner will face in the event a lawsuit has been filed against the business. In order to do so in an effective manner, the partnership agreement will have to be paired with other documents. A mere business partnership agreement alone, in such a situation may not be enough to protect the partners from liability in a complete manner.

  • Dispute resolution- A business partnership agreement must include a dispute-resolution process. Even when the business is being operated amongst the family manner or best friends, disagreements are common in business.

  • Business dissolution-when one or more partners decide to dissolve their business, their business partnership agreement must outline as to how such dissolution shall occur. It must explain the procedures for partners to join or leave their partnership. It will have to outline continuity or any succession planning for when partners decide to leave the business.

  • A partnership deed must also explain as to how the partnership’s finances shall be managed.

Business partnership agreement- some common mistakes to be avoided

business partnership agreement are some complex documents, as a result of which many people get bogged down in details, hence committing crucial mistakes in their partnership agreement.


Mentioned below are some of the common mistakes which are required to be avoided:

  • Skipping key details- Partnership agreements, would generally include some complex language for some specific topics as a result of which people may choose to exclude such terms, when they are unable to understand it. It is important to understand that one should never assume something when creating an agreement because it reads like fine print.

  • Trusting things will work out- It is a common practice that people would decide to go into business with people they like and trust, which shall lead them to believe that there won’t be a problem later. A partnership agreement shall exist to resolve these issues when they inevitably arise.

  • Not having the agreement reviewed by counsel- Partnership agreements may vary with the state as well as the type of industry, hence the laws and best practices will be constantly changing. When you decide to not appoint an attorney to draft your agreement, it is important that you at least have an attorney to review it before signing such a document.

  • Not amending the agreement later- with time the partnerships would also evolve and these governing documents must also be updated from time to time in order to reflect the changing business. Otherwise, some may arise which could not be solved by partnership deed.

Conclusion

Business partnership agreements assist in defining and legalising the relationship between different partners and list their rights and obligations. This would limit the liability of the partner and would also help resolve these issues.


As could be understood from the above discussion, though a partnership agreement could be created by the respective parties personally, it is necessary that they at least get those documents reviewed by an experienced advocate.


Lead India offers you a team of experienced advocates who could help you draft as well as review such agreements. In case you wish to seek free legal advice online or talk to a lawyer for matters related to civil suits or for any other matter, you may contact us.


Call Us: +91–8800788535


 
 
 

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