Partnership Agreement Template and Key Clauses (2026)

A partnership agreement is the contract between the people who run a business together. It records how much each partner put in, how they share profit and loss, who decides what, and what happens when a partner wants to leave, dies, or falls out with the others. Many partnerships start on a handshake and no document at all, and that is exactly how good friendships and good businesses get destroyed. The agreement is cheap insurance against a predictable set of fights. This is general information, not legal advice. Partnership law, and the default rules that apply when you have no agreement, vary by country and state, so confirm your local position before relying on a template. ## Why you need one even if the law has defaults If partners do not write an agreement, the law supplies default rules. In many places those defaults split profits equally regardless of who put in more, give every partner an equal say, and make it hard to remove a difficult partner. The defaults rarely match what the partners actually intended. A written agreement lets you set your own terms instead of living with a generic set that may not suit your business at all. ## A plain partnership agreement template Adapt this skeleton for a small business partnership: > Partnership Agreement

This Agreement is made on [date] between [Partner A], [Partner B], [Partner C] ("the Partners").

1. Name and business. The partnership will trade as [name] and carry on the business of [description].
2. Capital. Each partner contributes: [A: amount/assets; B: amount/assets]. > 3. Profit and loss. Profits and losses are shared [equally / in these proportions: ...].
3. Drawings and salary. Each partner may draw [amount/rules]; any partner salary is [stated].
4. Management and decisions. Day-to-day decisions by [majority / named partner]. The following major decisions need [unanimous / specified] approval: [borrowing above X, taking on a new partner, selling assets, changing the business].
5. Banking and accounts. The partnership will keep proper accounts and a bank account requiring [number] signatures.
6. Admitting a new partner. A new partner may be admitted only with [unanimous] consent.
7. Leaving, retirement, and death. On a partner leaving, retiring, or dying, their share is valued by [method] and bought out over [period]. [Include a buyout and valuation method.]
8. Restriction on competition. A departing partner will not [compete / solicit clients] for [reasonable period and area].
9. Dispute resolution. Disputes will be resolved by [mediation then arbitration / named process].
10. Dissolution. The partnership may be wound up on [events], and assets distributed [order].
11. Governing law. This Agreement is governed by the law of [country/state].

Signed by each partner, dated. ## The key clauses that actually prevent disputes Capital and profit split. The most common early fight is "I put in more, why do we split equally?" Decide this in writing, and separate the return on capital from the reward for work. Decision-making. Say which decisions need everyone's agreement and which a partner or majority can make alone. A deadlock clause, describing what happens when partners cannot agree, is worth adding for a two-partner business. Exit and buyout. This is the clause people most regret leaving out. When a partner leaves, dies, or is forced out, how is their share valued, and how and when is it paid? Without a method, you get a valuation dispute on top of an emotional one. Many agreements link this to a formula or an independent valuer, and spread payment over time so the business is not drained at once. Restrictive covenants. A reasonable limit on a departing partner competing or taking clients protects the remaining partners, but it must be reasonable in scope, time, and area or a court may refuse to enforce it. Dispute resolution. Agreeing in advance to mediate and then arbitrate keeps a fallout out of open court and can save the business. ## Partnership versus LLP or company A general partnership gives the partners unlimited personal liability for the firm's debts, which is a serious risk. Many partners instead form a limited liability partnership (LLP) or a limited company to cap that exposure. If you do, the internal document is an LLP agreement or shareholders' agreement rather than a simple partnership deed, though the key clauses above still apply. Choosing the right vehicle is a decision to take early, with advice. ## Common mistakes to avoid - Having no written agreement and relying on the law's default equal split.

• Leaving out the exit and buyout method, guaranteeing a dispute when someone leaves.
• Not deciding which decisions need unanimous consent, so one partner can bind the others.
• Writing restrictive covenants so wide they become unenforceable.
• Ignoring personal liability and staying a general partnership when an LLP or company would protect them.
• Never updating the agreement as the business and the partners change. ## Keeping the agreement and its amendments current Partnership terms change as partners join, leave, and renegotiate, and the agreement often stops matching reality. Keeping the current version, every amendment, and the key dates such as buyout timelines in one place avoids arguments about which terms actually apply. Adira is an AI contract workspace that drafts, reviews, and tracks agreements and their amendments in one place, with a clear version history. More at its product page. The template above stands on its own. ## Bottom line A partnership agreement replaces the law's generic defaults with terms the partners actually chose: how capital and profit are split, who decides what, and above all how a partner exits and is bought out. Add fair restrictive covenants and a dispute process, consider whether an LLP or company would protect you better, and keep the document current. Because partnership and liability rules are local, confirm your agreement with a qualified lawyer before relying on it.