What is a Partnership Agreement?
A Partnership Agreement is a legal agreement between two or more parties who wish to conduct a business together in a partnership.
A Partnership Agreement governs all of the important terms of the working relationship – don’t form a partnership without one!
Some of the most important terms of the agreement include each party’s contributions, decision-making, share of profits, and winding up.
Unless you have agreed otherwise, all partners are equal and must share the business profits and losses equally.
Who can use this template?
- People wanting to formalise their business relationship
- Two or more parties working together
- Suitable for all Australian states and territories
What is a Partnership business structure?
A partnership is a group of people who conduct a business together and distribute income or losses between themselves. For example, if you and a friend or family member decide to set up a business together, you might operate it as a partnership.
Partnerships are relatively easy and inexpensive to set up and operate. The partners share income, losses and control of the business.
Key features of a partnership:
require a separate tax file number (TFN)
must apply for an Australian business number (ABN) and use it for all business dealings
share control and management of the business
don’t pay income tax on the income earned – each partner is taxed separately on their share of the partnership income
require a partnership tax return to be lodged with the Australian Taxation Office (ATO) each year
require each partner to be responsible for their own superannuation arrangements
must register for GST if turnover is $75,000 or more
Do I need a written contract for a partnership?
Yes, it’s highly recommended! A Partnership Agreement protects everyone involved.
A Partnership Agreement will help to set the ground rules in black and white, so everyone is clear on their obligations and responsibilities from the start. Having a formal written agreement will also reduce the likelihood of disputes.
A Partnership Agreement is about more than wrapping your partners up in red tape and telling them what they can’t do. Think of your contract as relationship insurance: it does all the hard, boring work of keeping the relationship on track so that you can focus on the fun part – the actual business.
What does the Partnership Agreement template include?
Our Partnership Agreement template covers everything you need:
- Partnership details – including details for each partner and the partnership name
- Duration and Termination of the Partnership – start date and notice period required before dissolving the partnership
- Labour Contribution – how much labour each partner will contribute (e.g. full-time, part-time)
- Decision Making – how the partners can make decisions (e.g. unanimous vote)
- Financial Matters – includes capital contribution, drawings, profit split, wages and bookkeeping
- Insurance – requirements for insurance
- Restrictions on the parties – conditions around entering contracts, borrowing money and incurring debts for the partnership
- Costs and Expenses – how the partners will split expenses
- Winding Up – conditions for winding up the partnership (e.g. if one partner wants to leave)
- Dispute Resolution – this clause explains the process to deal with a dispute
- General – standard contract clauses such as Assignment, Severance, Entire Agreement, Waiver and Governing Law
Do I need a Partnership Agreement for a one-off project?
No, a Partnership Agreement is really designed for an ongoing business relationship where two or more people formalise the terms of their partnership business structure into an agreement.
For a one-off project, you should look at a Collaboration Agreement instead.
Does the partnership name have to be our real names?
No, you can choose a different partnership name if you like.
You may choose to register a business name to use as your trading name.
Otherwise, you can use a combination of the partners’ names (e.g. John Smith & Jane Smith)
Is this Partnership Agreement template legally binding?
All of our templates are written by qualified Australian lawyers who hold an Australian legal practicing certificate.
We are affiliated with a commercial law firm based in Sydney.