The Partnership Agreement The partnership agreement addresses a number of issues relating to the management and operation of the partnership. In drawing up the partnership agreement, the prospective partners should consult with legal counsel to assure that the needs and desires of the partners and relevant legal issues are addressed. Some of the issues typically addressed in a partnership agreement include: • Name of the partnership. • Duration of the partnership. • Location of its place of business. • Partner capital contribution, whether partners may make additional contributions. • Level at which capital accounts of the partners must be maintained. • Profit /loss allocation for each partner. • The amounts of any regular drawings against profits. • Responsibilities and authority of each partner. • Amount of time to be contributed by each partner. • Rules for adding or removing partners. • Prohibition of partners outside business activities which would compete with the partnership business. • Name of the managing partner and method for resolving management disputes. • Method of determining the value of goodwill in the business, in case of death, incompetence, or withdrawal of a partner or dissolution of the partnership for any other reason. • Method of liquidating the interest of a deceased or retiring partner. • Circumstances under which a partner must withdraw from active participation, and arrangements for adjusting the partner’s salary and equity. • Whether or not surviving partners have the right to continue using the name of a deceased partner in the partnership name. • Basis for expulsion of a partner, method of notification of expulsion, and the disposition of any losses that arise from the delinquency of such a partner. • Period of time in which retiring or withdrawing partners may not engage in a competing business. • Procedures for handling the protracted disability of a partner. • How partnership accounts are to be kept. • The fiscal year of the partnership. • Whether or not interest is to be paid on the debit and credit balances in the partners’ accounts.
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