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What should a business partnership contract include?

On Behalf of | May 14, 2024 | Business Law |

When beginning a business partnership, establish clear guidelines and expectations from the get-go.

A well-drafted partnership contract should outline the rights and responsibilities of each party involved.

Introduction and background

Forbes reports that 70% of business partnerships fail. This demonstrates the importance of a proper contract. Begin by providing an overview of the partnership, including the names of the parties involved, the purpose of the partnership and any relevant background information. This section sets the stage for the rest of the contract.


Outline the contributions that each partner will make to the partnership, whether it is financial investments, intellectual property or other resources. Clearly define each partner’s role and responsibilities.

Profit sharing and loss allocation

Specify the distribution of profits and losses among the partners. You can base this on each partner’s percentage of ownership or according to a predetermined agreement. Establish a fair and transparent method for profit sharing.

Decision-making authority

Clearly define how the partners will make decisions. Will it be a consensus-based approach where all partners must agree, or will certain decisions require only a majority vote? Establishing a decision-making process upfront can help prevent conflicts and ensure smooth operations.

Management duties

Detail the day-to-day management duties of each partner, including who is responsible for overseeing various aspects of the business. Clarifying these roles helps avoid confusion and ensures the efficient performance of tasks.

Dispute resolution

Include a mechanism for resolving disputes that may arise between partners. This could involve mediation, arbitration or another agreed-upon method. Having a clear process for resolving conflicts can help maintain the integrity of the partnership.

Duration and termination

Specify the duration of the partnership and the conditions under which the partners may terminate it. This could include events such as the death or withdrawal of a partner or the achievement of a specific goal. Establishing clear guidelines for termination helps protect the interests of all parties involved.

There are benefits to having a business partner. There are potential pitfalls as well, making a contract a key part of the relationship.

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