Solicitor-drafted business partnership agreement template. Download form with expert guidance notes.
This solicitor-drafted Business Partnership Agreement template can be used for setting up a new business partnership or for formalising an existing business partnership of two partners.
This Business Partnership Agreement download, in Word format, is a contract between individuals starting a business partnership setting out:
The answer to this is that without an agreement, there can be uncertainties as to the relationship between the business partners and how the business partnership should be run.
For example, in the absence of an agreement, on the death of a partner, the partnership has to be dissolved. This might not be in the interests of the surviving partners who wish to keep the partnership going.
Similarly, in the absence of any agreement to the contrary, the partners have the right to share equally in the capital and profits of the business.
This agreement sets out clearly the rules concerning such matters as capital and profit shares, drawings on account of profit, management and decision making, permitted business partnership expenses, retirement and expulsion or death of a partner (and the financial consequences of retirement, death or expulsion).
This business partnership agreement form includes 21 clauses, which cover the following:
For further details of the clauses covered in this Business Partnership Agreement form, see the ‘Contents’ tab above.
Drafted by solicitors for straightforward completion, the Business Partnership Agreement download includes detailed guidance notes on how to fill the business partnership agreement template in.
This Business Partnership Agreement form is supplied by ContractStore.com.
Clauses in this Business Partnership Agreement download
This clause simply sets out the definitions of a number of terms used throughout the agreement.
2. Establishment of the business partnership
This clause simply states the date on which the partnership comes into effect.
3. Name of principal office and property
This section includes the name of the partnership and the address of the head office.
It makes it clear that the premises of the partnership and office furniture and equipment are held by the business partnership. Where the partnership's premises or furniture/equipment are held in the name of one business partner, it's made clear that the partner holds that property in trust for the partnership.
If there is some other arrangement (e.g. one partner owns the property where the business is carried on and charges rent to the partnership), then this clause can be amended.
This section outlines the amount of capital each business partner has to contribute to the partnership. The percentage contribution of each partner is also shown, since this can be relevant if percentages are used in relation to voting rights.
This agreement also makes it clear that any additional capital is to be contributed in the same proportions as the initial capital.
The agreement also deals with the entitlement of the partners to receive interest on their respective shares of capital.
5. Profits and losses
It's usual for profits and losses to be shared in the same proportions as the capital contributions, but this is not always the case. This section of the agreement includes the percentage share of each business partner.
If there are any expenses which the partners might incur but which are not to be treated as expenses of the partnership, then this section of the agreement can be amended accordingly.
It's usual for business partnerships to arrange that each partner can withdraw a regular monthly amount on account of their share of the profits, similar to a monthly salary. This section of the agreement deals with this matter, and makes it clear that if there is not enough money in the account, drawings cannot be taken. Similarly, any partner who withdraws more than their profit share for a year must immediately repay the surplus - with interest, if required.
Often, but not always, a business partnership will retain part of its profits to meet the anticipated income tax liabilities of each partner and arrange for the partnership's accountant to settle income tax liabilities with the Revenue & Customs. This section of the agreement provides that where the tax liability of an individual partner is less than anticipated, the balance of any sum reserved is to be returned to that partner. Similarly, where a tax rebate is received by a partner in respect of the partnership profits they are obliged to repay that rebate to the partnership.
This section of the agreement contains a reference to the possibility of one or both partners making a loan to the business partnership and in that case, interest at the agreed rate will be payable.
This section provides that a loan must be repaid on notice - six months is suggested in this agreement.
In practice, if any partner does make a loan to the partnership, it would be sensible to have a separate loan agreement dealing with these issues in more detail.
8. Conduct of partnership business
This is one of the most important sections of the agreement as it deals with the day-to-day management of the business partnership, and how decisions are arrived at. The clauses included in the agreement outline the following:
This section of the agreement requires all matters relating to the partnership to be agreed by both partners.
9. Good faith
This clause sets out some general obligations on the business partners.
If either of the partners is only involved on a part-time basis, or if a partner has an interest in another business, then the agreement can be amended accordingly to make it clear that the particular circumstances are acceptable to the business partnership.
10. Restriction on business partners
This section imposes a number of specific restrictions on business partners: serious harm can be done to a business if one of the partners, without any consultation, makes commitments to third parties, and this clause is intended to avoid those risks.
This section also requires a partner who fails to comply to indemnify the other partners so that they don't suffer loss, i.e. to make good that loss.
11. Partnership bank
This section includes the name and address of the bank and the signing arrangements.
This clause provides not only for proper accounts to be maintained but also for a balance sheet and profit and loss account to be prepared each year.
Relevant details need to be included in this part of the agreement. This clause may also be revised to provide for a business partner to receive maternity or paternity leave, if required.
It's important for every business to have adequate insurance in place.
Note too that the obligation to insure property of the partnership extends to property held in the name of one partner in trust for the partnership.
15. Termination, retirement and death
A fairly long notice period, usually at least six months, and sometimes as long as a year, is customary, when a business partner wishes to leave. For accounting reasons, it's helpful for the date of a partner's retirement to coincide with the date of the end of the accounting year.
A compulsory retirement age is included in this agreement.
Upon the death of a business partner, the partnership will be automatically dissolved.
A partner who becomes bankrupt, commits a material breach of the agreement, etc. can be required to leave the partnership if the other partner gives them notice. The consequence of this will be to dissolve the business partnership.
16. Consequences of termination
This clause sets out the need for a set of accounts to be prepared on dissolution of the partnership. The partners will be entitled to whatever is shown as being due to them in those accounts.
Note that where partnership property is held in the name of a partner in trust for the business partnership, the other partner is given the option to purchase that property before it's put up for public auction.
This clause deals with the formalities required for giving notice under the agreement.
18. Disputes, deadlock and governing law
In a business partnership of two partners it's advisable to have a formal means to resolve any potential deadlock.
This clause provides for either a two or three-stage dispute resolution process - negotiation, mediation and, finally, should the parties agree to include this option, arbitration. Ultimately, if at the end of the deadlock procedure the partners are still unable to reconcile their differences, the only realistic option is for the partnership to be dissolved.
19. Entire business partnership agreement
This clause makes it clear that any previous business partnership agreements or other arrangements agreed between the partners are of no effect once this agreement has been signed.
Includes a "Boilerplate" clause which deals with the possibility of one of the terms of the agreement becoming invalid for some reason.
Includes another "Boilerplate" provision, which makes it clear that if one of the partners is let off the hook, even if they have committed some breach of the agreement, that will not prevent the other partner from later taking whatever action is allowed under the agreement.