ClauseryFree partnership agreement template (Word)
A binding contract between two or more business partners defining ownership percentages, profit/loss split, decision-making, capital contributions, roles and how a partner can leave or be bought out.
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A partnership agreement governs how co-owners run a business together. Without one, default state partnership law applies (usually equal ownership and 50/50 split of profits regardless of contribution), which rarely matches what founders intend.
Cover ownership, capital, profit split, decision-making, admitting new partners, partner exits, death/disability, dispute resolution and dissolution. A good partnership agreement prevents costly disputes when things go well and when they do not.
What to include#
- Partners and business. Legal names of partners, partnership name, business purpose, principal address and start date.
- Capital and ownership. Each partner initial capital contribution (cash, property, services), ownership percentage, and how additional capital is called.
- Profits, losses and draws. How profits/losses are allocated (may differ from ownership %), when distributions are made, and salary/draw rules.
- Management and decisions. Voting rights (per capita or per ownership %), day-to-day authority, and what decisions require unanimous or supermajority vote (admitting partners, taking debt, selling the business).
- Exit and dissolution. What happens when a partner leaves, is disabled, dies or wants out: buyout formula, right of first refusal, non-compete, and wind-down process.
How to fill it in#
Step 1: Choose the partnership type
Decide GP, LP or LLP structure (affects liability and tax); talk to an accountant about tax treatment.
Step 2: Agree on ownership and splits
Talk openly about who contributes what, who does the work, and how profits/decisions are split — write that down.
Step 3: Define decision-making
Specify what decisions require majority vs unanimous vote to avoid deadlock.
Step 4: Add buy-sell provisions
Include a clear formula and process for buying out a departing/deceased/disabled partner and funding (life insurance is common).
Step 5: Have a lawyer review
Partnership law varies by state; have a business attorney review before signing, especially if you have outside investors or complex splits.
Related templates and guides
Questions
Do I need a written partnership agreement?
Not legally required in most states, but strongly recommended — default rules rarely match your intentions and disputes are expensive.
Is a 50/50 partnership a good idea?
It is common but make sure you have a deadlock-breaking mechanism (e.g. mediation, buy-sell clause, tie-breaker director).
Can I change it later?
Yes, by written agreement of all partners — amend and re-sign when circumstances change.
What happens without one?
Your state default partnership act applies: equal profit split, equal management rights, and partnership dissolves on a partner death or withdrawal.
Should partners be employees too?
Partners are generally not employees (they receive K-1s), but if a partner works day-to-day, a salary (guaranteed payment) can be specified in the agreement.
These are general templates, not legal or tax advice. Have anything unusual reviewed for your jurisdiction.