A partnership is a business formed with two or more people. Each person will contribute certain assets into the business and will reap a share in both the profits and losses of the business. Depending on the type of partnership, some partners will be actively involved in the business while others can be passively involved.

The most pivotal document to draft at the beginning of the partnership is a partnership agreement. A partnership agreement will set out all the terms and conditions of the partnership, agreed to by the partners.

The agreement will foresee any possible scenario from ownership to length of the partnership to death and termination of the partnership.

By signing a partnership agreement early on in their relationship, the partners can ensure that they are protected if something were to happen to the businesses or to a partner.

This type of agreement is for businesses that are partnerships, namely:

1. General Partnership (G.P.)
2. Limited Partnership (L.P.)
3. Joint Venture (or undeclared partnership)

YES! A partnership agreement provides you with protection in case something were to happen in a business. The agreement will answer all “what if” answers before they occur, that way you do not have to deal with these questions once a problem arises.

For more information on why partnership agreements are essential for your business, please read our blog post on the topic for more information, here.

YES! Even if you are partnering a good friend or a family member, running a business is not an easy task. Problems can arise between partners and if that happens, you want to have an agreement to guide you through the process with ease.

No. If you have a corporation,  you do not need a partnership agreement. Rather, you need a shareholder agreement. For more information on shareholder agreement, please contact us or send us a message on the form below.

The agreement should include:

1. Name of the partnership
2. Nature of the business
3. Purpose of the partnership
4. Types of partners
5. Percentage of ownership in the business
6. Capital contributed by each partners
7. Admission of new partners
8. Rights and responsibilities of the partners
9. Description of management powers and duties of the partners
10. How decisions will be made
11. Term (length) of the relationship
12. Who will take care of the tax and accounting affairs
13. Distribution of profit and loss
14. Retention of the profits for business needs
15. Partner time off (ex. sick leave, vacation…etc.)
16. Sale of a partner’s share in the business
17. Dispute resolution process
18. Continuity of partnership in the event of death, incapacity or disability
19. How the partnership can be terminated
20. Expulsion of a partner from the business
21. Adherence to provincial laws
22. Severability of the agreement

Yes, we always include a dissolution clause into our partnership agreements. This clause will determine what will happen if you and your partner do not agree about something in the business, what are the exit strategies, how a partner can withdraw…etc.

Yes, we recommend that a partnership agreement be updated every few years to reflect the wishes of the partners at that time.

The partnership agreement is a binding legal document. Therefore, it is best to have a lawyer guide you in the drafting process.

If you choose to draft the partnership agreement yourself, you can. However, we recommend having a lawyer revise that agreement.