Question 1

What is a partnership agreement?

Accepted Answer

A partnership agreement is a legal contract between two or more parties who wish to enter into a partnership together. The agreement outlines the responsibilities and financial obligations for each partner.

A partnership agreement is not always split equally among the partners. For example, one partner may be responsible for putting up the money while the other does all the work. This is often referred to as a silent partner.

Partnership agreements are often highly-guarded secrets. For example, a top executive may wish to compete with their current employer by opening their own company. By finding a partner to be the frontman and do all the wor, the silent partner can open their own company while maintaining his or her current position.

Question 2

What should be included in a partnership agreement?

Accepted Answer

At the very least a partnership agreement should name each partner and include the name of the partnership. For each partner the agreement should outline the financial investment, role and responsibilities, and profit split.

Partnership agreements become more complex when one partner is more of an investor than an actual working partner. The agreement might specify that one partner invests all of the money while the other partner does all of the work. If this is the case, the agreement should clearly state how much each partner receives as a share of the profits.

Question 3

What are the most common types of partnerships?

Accepted Answer

In the United States the most common types of partnerships are the General Partnership, Limited Partnership, and Limited Liability Partnership.

The General Partnership is most common form of partnership in the U.S.

The Limited Partnership often includes both general partners and limited partners. The general partners usually do most of the work. The limited partners are usually not involved the day-to-day operation of the business or decision making.

Limited Liability Partnerships are not legal in all U.S. states. Limited liability partnerships are most common for professional organizations such as doctors and lawyers. While most of the partners participate in the business, they are not responsible for the actions or decisions of the other partners. For example, this one doctor cannot be held responsible for malpractice committed by another doctor who is also a member of the partnership.

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