Partnership Agreements
A partnership agreement records how partners share profits and losses, make decisions, bring in new partners and leave, in place of the default rules that otherwise apply.
- For professional, trading and family partnerships
- Profit share, capital, drawings and decision making
- Admission, retirement, death and buyout of partners
- Fixed fee, prepared from the terms the partners have agreed
Going into business together
What Happens Without an Agreement
A partnership exists as soon as people carry on a business together with a view to profit, whether or not anything is signed.
Without a written agreement, partnership legislation fills the gaps with default rules. Those rules generally share profits equally regardless of what each partner contributes, allow any partner to bind the firm in the ordinary course of business, and can bring the partnership to an end when a partner dies or becomes bankrupt.
A partnership agreement replaces those defaults with the arrangement the partners have actually agreed. It matters all the more because partners are generally liable for the debts of the partnership, so the agreement should set clear limits on who can commit the firm and to what.
What it covers
What the Agreement Covers
The agreement is prepared around the partners, their contributions and how the business will operate.
Capital and Contributions
What each partner contributes, how capital accounts are kept and whether interest is paid on capital.
Profit, Losses and Drawings
How profits and losses are shared, and how and when partners may draw on their share.
Management and Authority
Which decisions need unanimous agreement, and limits on a partner’s authority to commit the firm.
Admission of New Partners
How a new partner is admitted and on what terms, including any capital they must contribute.
Retirement and Expulsion
Notice required to retire, grounds for expulsion and how an outgoing partner’s share is valued and paid.
Death and Incapacity
Whether the partnership continues, how a partner’s estate is paid out and any related insurance.
Fixed fees for this work are published on our pricing page.
Get a Fixed-Fee QuoteHow it works
From Agreed Terms to Signed Agreement
Share the arrangement
Who the partners are, what each contributes, how profits are split and how the business will be run.
We confirm the fee
You receive a fixed fee in writing before any work starts.
We prepare the agreement
The draft is sent with a summary of the key clauses and any decisions the partners still need to make.
The partners sign
Once the partners are comfortable with the terms, the agreement is signed by each of them.
Before you start
What the Partners Should Agree First
A partnership agreement records how the partners intend to run the business together. Settling these points first keeps the drafting focused.
Contributions: What each partner is putting in, whether cash, equipment, clients, premises or time, and whether those contributions are to be repaid on exit.
Profit and drawings: How profits and losses are shared, whether any partner receives a salary or priority return, and how often partners may draw.
Decision making: Which decisions any partner can make alone, which need a majority, and which need everyone to agree.
Leaving and succession: What happens when a partner retires, dies, becomes incapacitated or wants to sell, and how their share is valued and paid out.
Common Mistakes
Assuming equal shares are fair: Default rules share profits equally, which may not reflect different contributions of capital or time.
No limit on authority: Without clear limits, any partner can commit the whole firm to contracts and debts.
No plan for a partner leaving: Without agreed valuation and payment terms, the departure of a partner can force the business to be wound up.
Mixing personal and partnership assets: Property and equipment used in the business should be clearly recorded as either partnership property or a partner’s own.
Points Worth Knowing
Liability is not limited
Partners are generally liable for partnership debts, which is why many businesses use a company instead.
Each partner can bind the firm
Unless limited, a partner acting in the ordinary course of business can commit the whole partnership.
Tax registrations
A partnership needs its own ABN and tax file number, and lodges its own tax return.
Business name
If the partnership trades under a name other than the partners’ own names, it must register a business name.
Plan for a partner leaving
The valuation and payout terms for an outgoing partner are where most disagreements arise.
Review the structure
As the business grows, a company or trust may suit it better. Your accountant can advise on the change.
Our role is to document the partnership. We do not act where a dispute between partners has already arisen.
Talk to Us About Your MatterPartners who want limited liability often operate through a company, with a shareholders agreement in place of a partnership agreement.
Partnership Agreement FAQs
Do we need a written partnership agreement?
Is a partnership agreement the same as a joint venture agreement?
Can a partnership agreement limit a partner’s liability to outsiders?
What does a partnership agreement cost?
Can you update an existing partnership agreement?
Do partners need to register the partnership?
What happens to the partnership if a partner dies?
Have a question that is not answered here?
Contact UsGoing Into Partnership?
Tell us about the partners and the business, and we will confirm a fixed fee before any work starts.
Get a Fixed-Fee Quote