5 Clauses Every Partnership Agreement Needs

1. Ownership and contributions

Spell out who owns what percentage, what each partner contributed (money, property or work) and what happens if more money is needed later.

2. Decision-making

Decide which choices need a simple majority, which need everyone's approval, and who handles day-to-day management.

3. Profits, losses and pay

Explain how profits are shared, when distributions are made, and whether partners who work in the business receive a salary.

4. Buy-sell provisions

This is the clause partners most often skip and most often regret. It covers what happens when a partner wants to leave, retires, becomes disabled or dies:

• Who can buy the departing partner's share.
• How the share will be valued.
• How and over what period the buyout will be paid.

5. Dispute resolution

Agree in advance how disagreements will be handled, for example negotiation first, then mediation, then arbitration. It's far easier to agree on a process before there's a conflict.