Set up a partnership on the right footing
A partnership agreement records how two or more people will run a business together: who put in what, how profits and losses are split, who can make which decisions, and what happens if someone wants out. Skipping it means falling back on default partnership law, which rarely matches what the partners actually intended. This tool assembles a clear outline you can take to a solicitor.
Choosing the right partnership structure
The three common structures differ mainly in how liability is shared:
| Structure | Who manages | Personal liability |
|---|---|---|
| General Partnership (GP) | All partners equally | Unlimited — each partner personally liable for partnership debts |
| Limited Partnership (LP) | General partners only | General partners: unlimited. Limited partners: capped at their contribution |
| Limited Liability Partnership (LLP) | All members | Limited — personal assets protected except for own negligence |
An LLP is the most common choice for professional services firms (accountants, solicitors, architects) because it combines limited liability with partnership taxation. A general partnership is the simplest to set up but leaves each partner exposed to the actions of the others. The outline generated by this tool adapts the liability clause to the structure you select.
How the outline is generated
You choose a structure and enter each partner with a capital contribution. The tool then computes profit shares three ways:
- Equal — every partner gets
100 / number of partnerspercent. - By contribution — each partner’s share equals
their contribution / total contributions. - Custom — you type the percentages directly, and the tool warns if they don’t sum to 100%.
It then writes ten standard sections — parties, capital, profit and loss, management, roles, liability, drawings, dispute resolution, withdrawal, and dissolution — with the liability clause adapted to the structure you selected.
The ten clauses and what each covers
- Parties — full legal names and addresses of all partners, plus the partnership name and registered address.
- Capital contributions — what each partner is putting in (cash, assets, services), and whether contributions earn interest.
- Profit and loss sharing — the split percentages and whether losses follow the same ratio as profits.
- Management and voting — who can make day-to-day decisions, and what requires a majority or unanimous vote.
- Roles and responsibilities — which partner is responsible for which function (sales, finance, operations, etc.).
- Liability — adapted to the chosen structure; in a GP this flags joint and several liability.
- Drawings — how much each partner can take out as a regular drawing versus leaving profit in the business.
- Dispute resolution — a requirement for mediation before litigation, and the nomination of a mediator or process.
- Withdrawal — notice period, valuation method for the departing partner’s share, and right of first refusal for remaining partners.
- Dissolution — the triggers (death, insolvency, unanimous decision), asset distribution order, and wind-down process.
Practical things to settle before you sign
- Agree on a specific valuation method for the business when a partner exits. “Fair value” is vague; revenue multiples, book value, or an independent accountant’s opinion are concrete.
- Define what counts as a major decision requiring all partners’ consent — for example, taking on debt above a set threshold, entering new lines of business, or selling material assets.
- Record each partner’s expected time commitment in writing. A 50/50 profit split made sense when both partners were full-time; it often becomes a source of resentment if one later becomes part-time without a corresponding adjustment.
This tool produces an outline, not a binding legal contract. Have a qualified solicitor review and adapt it for your jurisdiction before anyone signs.