General Partnership Agreement

General Partnership Agreement: a practical guide

A General Partnership Agreement is a written record of how people or organizations plan to own and run a business together as partners. It can set out contributions, decision-making, sharing of profits and losses, and what happens when a partner leaves or the business ends.

What it's for

Partners use this document to discuss and record their working arrangements, often before they start operating or when they want to put existing arrangements in writing. Clear terms can help partners understand their roles and reduce misunderstandings about money, decisions, and responsibilities.

The agreement should match the partners’ actual business structure and plans. If the parties are combining resources for one defined project rather than running a business together on an ongoing basis, a Joint Venture Memorandum of Understanding may be a better fit. The label “general partnership” can have different effects in different places, so check local rules before relying on that description.

Who uses it

• Two or more individuals starting or running a business together.
• People already working as partners who want to record or clarify their arrangements.
• A person and a company planning to operate a business together.
• Several co-owners who need to agree how they will contribute funds, make decisions, and divide business results.
• Partners changing their roles, contributions, or ownership shares.

Terms to decide on

Business and scope

Describe the business activity, its name if it will use one, and what the partnership plans to do. State any important limits on the work or on activities that need everyone’s approval.

Contributions and future funding

Record what each partner will contribute, such as money, property, services, or expertise, and when each contribution is due. Explain how partners will decide on additional funding and what happens if someone cannot contribute.

Ownership and business results

Set out each partner’s share and explain how profits, losses, and any distributions will be allocated. Clarify whether shares reflect contributions, ongoing work, or another agreed basis.

Roles and authority

Describe each partner’s regular responsibilities and what each person may decide or commit the business to do. Identify decisions that require approval from all partners or a stated voting threshold.

Records, spending, and payments

Decide who keeps business records, how partners can review them, and how expenses are approved and reimbursed. State whether partners receive regular payments for their work and how those payments are decided.

Business obligations and responsibility

Decide how partners will share responsibility among themselves for business obligations and expenses. This agreement may not determine who outside parties can hold responsible, so check local rules or ask a qualified lawyer if significant risk is involved.

Changes, departures, and closure

Explain how partners may agree to change the arrangement, how a partner can leave, and how a new partner may join. Set out how the partners will address a departure or closure, including outstanding obligations and the handling of business property.

Common mistakes

• Using equal ownership shares without deciding whether profits, losses, voting power, and day-to-day duties should also be equal.
• Listing an initial contribution but saying nothing about later funding needs, loans from partners, or a partner who cannot contribute more.
• Giving every partner broad authority without setting limits for major purchases, borrowing, contracts, or other significant commitments.
• Describing roles in general terms without saying who handles routine work, records, customer matters, or expense approvals.
• Leaving a partner’s departure or the business’s closure to a future discussion, when interests may already differ.
• Assuming that writing “partnership” in the document settles how the relationship will be treated where the business operates.

Before you sign

• Confirm the names and contact details of every person and organization on each side.
• Check that each contribution, ownership share, and allocation of profits and losses is stated consistently.
• Read the decision rules and make sure they cover important actions as well as ordinary business choices.
• Discuss how the partners will handle a disagreement, departure, or inability to continue working.
• Review the agreement together and correct unclear wording, missing details, and inconsistent figures.
• Check local rules on signing, witnesses, notarization, registration, notice periods, and any required wording, or ask a qualified lawyer if significant money or risk is involved.