Overview of Partnership Agreement

 

What is this document?

A Partnership Agreement governs the relationship between two or more partners in a venture. It establishes the rules of the partnership and governs each party’s responsibilities to the business and to other partners.

 

When would I use this document?

This document can be used when establishing a business between two or more partners. This document would NOT be used for a Limited Liability Partnership.

 

Who signs this document?

This document is signed by each of the participating partners.

 

More details about this document

A Partnership Agreement enables business partners to establish ground rules for the business’ governance and operations. It is prudent to implement a Partnership Agreement regardless of whether a partnership is formed between friends, family members, or with strangers.

Partnership Agreements dictate how a partnership will operate, and more specifically the responsibilities of each partner in terms of contributing capital to the business, division of profits, management decisions, dispute resolution between partners etc.

Partnership Agreements are important because partnerships in Canada are not separate legal entities like a corporation. Individual partners have the capacity to bind the entire organization, including the other partners, and therefore it is important to outline each partner’s authority and responsibilities.

 

What are the core elements of this document?

The core elements of a Partnership Agreement include: Primary Purpose of Partnership, Capital Contributions, Withdrawal of Capital, Proportionality of Profit & Loss, Management, Decision Making, Contract Binding Authority, Admitting or Removing Partners, Dissolution of Partnership and Partner Voting Rights.  

Additional clauses may include: Books of Account, Annual Report, Term of Partnership, Place of Business, Interest on Capital, Fiscal Year End, Frequency of Meetings, Duty to Devote Time, Forbidden Acts and Life Insurance.  

 

Related Documents

Limited Partnership Agreement – a document setting up a specialized partnership with a general partner and limited liability for limited partners

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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