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Oct 13, 20234 min read

How To Write A Business Partnership Agreement?

A business partnership agreement outlines each partner's obligations and gives clear guidelines for how the business will operate. These agreements are put in place to resolve conflicts, determine duties, and specify how profits and losses are divided.


Any partnership in the business where there are two or more shareholders must have a business partnership agreement. This legal document offers essential guidance for business operations.

Business Partnership Agreement: Meaning and Purpose


An agreement between multiple business partners that outlines the objectives and legal framework of the business's existence is known as a business partnership agreement. It includes various information such as-

  • Individual partners' obligations

  • Capital investments

  • Partnership property

  • Shares of ownership owned by each partner

  • Conventions for making decisions

Therefore, these partnership agreements are crucial in situations when sentiments may otherwise take control, even though businesses rarely start out with concerns about a potential partnership dispute or how they will dissolve the business. Instead of a verbal agreement between partners, a written, binding contract is an enforceable document.


Steps to Write a Business Partnership Agreement


All expected concerns relating to the co-management of the business must be included in a business partnership agreement. Employing legal counsel or finding a customized template online are the two most simple ways to create a business partnership agreement. It must include: -

  • Start by identifying the business's name, legal form, and location (i.e., which state's laws will apply to it).

  • Describe the objectives of the partnership and the activities that it is going to and will not undertake.

  • ownership interest. Clearly state what share of the business each partner owns. List the obligations and privileges of each partner.

  • Describe the procedure by which choices are taken and the responsibilities of each partner. Include information on who controls the business's finances and who must consent to the addition of new partners. Include details about the partners' share of income and losses as well.

  • The agreement shall restrict each partner's responsibility in the case of business litigation if the partnership is organized as an LLC. A partnership agreement must be used in conjunction with other legal instruments, like as articles of incorporation, in order to accomplish this. The partners' liabilities may not be entirely covered by a business partnership agreement.

  • A mechanism for resolving disputes should be included in any business partnership agreement. Disagreements arise in the workplace often, even when working with close friends or family.

  • The agreement should specify how the partnership will be dissolved if one or more partners decide to split ways with the business. The steps for either entering or leaving the partnership should be clearly outlined. It should also describe any continuity or replacement strategy in case any partners decide to leave the business.

  • Describe the partnership's financial management strategy, including how small business taxes will be handled.

Business Partnership Agreement: Stages

  • This stage of "Initial Partnership" entails drafting the initial business partnership agreement. An agreement that regulates the general operations of the business, the decision-making process, ownership stakes, and managerial responsibilities will be created by you.

  • In the stage of "Addition of limited partners," the business may have the chance to add additional partners as it expands. Whitworth claims that the founding partners may agree to a "small carve-out of minor equity ownership" for the new partner as well as restricted voting rights that offer the new partner some control over operational choices.

  • In the stage of "Addition of full partners," a limited partner may occasionally need to be elevated to a full commercial partnership. The conditions and procedure for converting from a limited partner to a full partner position, which comes with full voting privileges and influence on par with that of the founding partners, should be outlined in a business partnership agreement.

  • In the stage of "Continuity and succession" Founders may eventually retire or leave the business without desiring to dissolve it. It is essential to lay out your plan, especially if you initially failed to incorporate continuity and succession planning. Describe how the remaining partners will be assigned ownership stakes and duties once the departing partners have resigned or retired.

Since things in business change frequently, it is essential to create a business partnership agreement that could act as a cushion of stability when things are chaotic or uncertain. Therefore, you must establish a partnership agreement if you're starting a business with a partner. Even though it might not seem essential right now, you'll be glad you made an agreement when a problem evolves.


You will need the help of a lawyer to help you in the drafting of a business partnership agreement. Similarly, the lawyers can also help you in the contract drafting process anywhere in the world as and when required.


One can talk to a lawyer from Lead India for any kind of legal support. In India, free legal advice online can be obtained at Lead India. Along with receiving free legal advice online, one can also ask a legal question to the experts online free through Lead India.



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