What is a partnership agreement?

A partnership agreement is a contract between two or more owners of a business. It usually says who owns what, who puts in money or work, how profits and losses are shared, how decisions are made, and what happens if someone wants to leave.

Even if you trust each other, a written agreement matters. Without one, your state's default partnership rules may control important issues like voting, profit sharing, and partner responsibilities.

If you are still deciding on your business structure, it may also help to read LLC vs. corporation: which is right? and how to form an LLC in the US.

A good agreement is usually specific about daily business issues, not just big-picture ownership.

Common topics include:
- each partner's ownership percentage
- cash, property, or work each partner contributes
- how profits and losses are divided
- who can sign contracts or spend company money
- how votes work for ordinary decisions and major decisions
- what happens if a partner dies, becomes disabled, wants to leave, or stops doing their part
- whether a partner can start a competing business
- how disputes will be handled

This document is different from other business records. For example, an LLC is a limited liability company, a business structure created under state law. An operating agreement is the internal rulebook for an LLC. A partnership agreement plays a similar role for a partnership, but the exact rules depend on the kind of partnership and the state.

Rules can vary by state, so check your Secretary of State website and consider getting help through partnership and founder agreements. FoundryCounsel is not a law firm and does not give legal advice. It shares general educational information and can help you get matched with a licensed business-law attorney.

Two friends start a catering business. One puts in $40,000. The other contributes recipes, supplier relationships, and full-time work. They assume they will "figure it out later."

A year later, the business is making money, but they disagree about pay, ownership, and whether one partner can sign a lease alone. A written partnership agreement could have addressed those questions from the start by spelling out ownership, authority, compensation, and exit rules.

That does not guarantee there will never be a dispute. But it often makes disputes easier to manage because the expectations are written down.

If you already have a partner or are about to bring one in, this is a good time to put the terms in writing.

1. List the business points you and the other owner have already discussed.
2. Identify open questions, like ownership split, voting, pay, and exit rights.
3. Check your state's rules through the Secretary of State.
4. If money, control, or liability is significant, talk with a licensed attorney.

If you want help finding one, FoundryCounsel offers a free matching service for business owners. You can learn how it works, explore services, or get matched. When you reach out, share only contact details and a short description of the issue, not sensitive personal or business information.