Ownership and transitions
Partnership agreement
A contract among co-owners that sets how they share profit, make decisions, add or remove partners, and handle an owner's exit.
A partnership agreement is the written contract among co-owners of a business. The IRS describes a partnership as the relationship between two or more persons who join to carry on a trade or business. The agreement records the terms the co-owners choose.
Typical subjects include profit sharing, decision rights, capital contributions and what happens when an owner leaves. It often works together with a buy-sell agreement, which sets the price and rules for an exit, and with the terms of a buy-in when a new owner joins.
Tax and ownership structure differ by entity type and state. Co-owners should work with an attorney and a CPA. This entry defines the term and gives no advice on structure.