Partnership Agreement

A Partnership Agreement coordinates management rights, equity division, capital contributions, and exit clauses between business partners.

Common Clauses

• Equity split and profit/loss allocation matrices
• Voting rights and management decision structures
• Capital contribution duties and dilution rules
• Process for transfer of shares or buyout terms
• Dissolution and liquidation procedures

Common Red Flags

• Lack of clear tie-breaker mechanism for 50/50 vote deadlocks
• Unclear dilution rules that allow unfair partner squeeze-out
• Vague buyout clauses that don't specify share valuation methods
• Joint and several liability terms without partner indemnification protections

Questions To Ask Before Signing

• How are partner decision deadlocks resolved?
• What valuation method is used to determine buyout share price?
• Are additional capital calls mandatory, and what is the penalty for default?
• How are new partners admitted to the business?