---
name: partnership-agreement
description: "Drafts business partnership agreements with roles, profit sharing, decision-making, and exit provisions. Use when forming a business partnership or joint venture."
allowed-tools: Read Write Glob
metadata:
  author: matthewhitcham
  version: "1.0"
---

# Partnership Agreement

## When to Use This Skill

Use this skill when you need to:
- Draft a partnership agreement for a new business venture
- Define roles, responsibilities, and profit-sharing among partners
- Establish decision-making processes and dispute resolution
- Create exit provisions and buyout terms

**DO NOT** use this skill for affiliate agreements, client contracts, or employment agreements. This is for business partner relationships. Always have an attorney review the final agreement.

---

## Core Principle

THE BEST TIME TO NEGOTIATE A PARTNERSHIP AGREEMENT IS WHEN EVERYONE IS EXCITED AND GETTING ALONG — BECAUSE THE AGREEMENT ONLY MATTERS WHEN THEY ARE NOT.

---

## Phase 1: Partnership Details

### Required Inputs

| Input | What to Ask | Default |
|-------|------------|---------|
| **Partner names** | "Who are the partners? (names and entity types)" | No default — must be provided |
| **Business name and type** | "What is the business and entity type?" | No default — must be provided |
| **Capital contributions** | "What is each partner contributing? (money, assets, IP, sweat equity)" | No default — must be provided |
| **Ownership split** | "What is the ownership percentage split?" | No default — must be discussed |
| **Roles** | "Who does what in the business?" | No default — must be defined |
| **Profit/loss split** | "How are profits and losses divided?" | Same as ownership split |

**GATE: Do not proceed without partner names, ownership split, and capital contributions.**

---

## Phase 2: Agreement Structure

```
## Partnership Agreement

**This Partnership Agreement** is entered into as of [Date] by:

Partner 1: [Name] ("Partner A")
Partner 2: [Name] ("Partner B")

### 1. Formation and Purpose

The Partners form [Business Name], a [general partnership / LLC /
other entity] organized under the laws of [State], for the purpose
of [business description].

### 2. Capital Contributions

| Partner | Contribution | Value | Ownership % |
|---------|-------------|-------|------------|
| Partner A | [Cash / IP / equipment / services] | $[X] | [X]% |
| Partner B | [Cash / IP / equipment / services] | $[X] | [X]% |

Additional capital contributions require unanimous consent. No partner
is required to make additional contributions beyond the initial amount.

### 3. Profit and Loss Distribution

Profits and losses shall be distributed as follows:
- Partner A: [X]%
- Partner B: [X]%

Distributions shall be made [monthly / quarterly / annually] after
maintaining a minimum operating reserve of $[X].

Each partner shall receive guaranteed payments of $[X]/month for
management services before profit distribution (if applicable).

### 4. Roles and Responsibilities

| Partner | Role | Key Responsibilities |
|---------|------|---------------------|
| Partner A | [Title] | [List primary responsibilities] |
| Partner B | [Title] | [List primary responsibilities] |

### 5. Decision-Making

**Day-to-day operations:** [Partner A / Either partner] may make
decisions for expenses under $[X] without the other partner's consent.

**Major decisions requiring unanimous consent:**
- Expenditures over $[X]
- Hiring or firing employees
- Entering contracts over $[X]
- Taking on debt or loans
- Adding new partners
- Changing the business direction or model
- Selling business assets

**Deadlock resolution:** If partners cannot agree, they shall:
1. Discuss and attempt to resolve within [7] days
2. Engage a mutually agreed mediator within [30] days
3. If mediation fails, [arbitration / buyout trigger / other mechanism]

### 6. Management and Authority

Each partner has the authority to:
- Bind the partnership in the ordinary course of business
- Access business bank accounts
- Execute contracts under $[X]

No partner may, without the other's consent:
- Admit new partners
- Assign partnership interests
- Pledge partnership assets as collateral
- Enter into agreements exceeding $[X]

### 7. Compensation and Draws

| Component | Partner A | Partner B |
|-----------|----------|----------|
| Management salary | $[X]/month | $[X]/month |
| Profit distributions | [X]% | [X]% |
| Expense reimbursement | Actual, pre-approved | Actual, pre-approved |

### 8. Exit Provisions

**Voluntary withdrawal:** A partner may withdraw with [90] days
written notice. The remaining partner has the right to purchase the
departing partner's interest.

**Buyout valuation:** The departing partner's interest shall be valued
using [method: book value / fair market value / formula / independent
appraisal].

**Payment terms for buyout:** [Lump sum within 90 days / installments
over 12-24 months with interest at X%].

**Right of first refusal:** Before selling to a third party, the
selling partner must offer their interest to the remaining partner(s)
at the same price and terms.

**Death or disability:** The deceased/disabled partner's interest
shall be [purchased by remaining partner(s) / transferred to estate].
Consider funding with key-person life/disability insurance.

### 9. Non-Compete

During the partnership and for [12-24] months after exit, no partner
shall engage in a competing business within [geographic area or
industry scope].

### 10. Confidentiality

All business information, customer lists, strategies, and financials
are confidential. This obligation survives termination.

### 11. Dispute Resolution

Disputes shall be resolved through:
1. Good faith negotiation (14 days)
2. Mediation (30 days)
3. Binding arbitration in [jurisdiction]

### 12. Dissolution

The partnership shall dissolve upon:
- Unanimous written consent
- A partner's death (unless buyout exercised)
- Bankruptcy of the partnership
- Court order

Upon dissolution, assets are liquidated and distributed in order:
1. Third-party debts
2. Partner loans to the partnership
3. Capital account balances
4. Remaining assets per ownership percentages
```

---

## Phase 3: Customize

- Adjust decision-making thresholds to match business scale
- Define specific non-compete terms appropriate to the industry
- Include intellectual property assignment if either partner brings IP
- Add vesting schedule for sweat equity partners if applicable

---

## Phase 4: Finalize

```
## Partnership Agreement Checklist

- [ ] Ownership percentages are agreed and documented
- [ ] Capital contributions are valued and recorded
- [ ] Roles and responsibilities are clearly defined
- [ ] Profit distribution method is explicit
- [ ] Major decision thresholds are set
- [ ] Exit/buyout provisions are defined with valuation method
- [ ] Non-compete terms are reasonable and enforceable
- [ ] Dispute resolution process is clear
- [ ] Dissolution procedures are documented
- [ ] Agreement reviewed by attorney for each partner (separate attorneys recommended)
- [ ] Both partners have signed
```

---

## Example: Two-Person Digital Agency

**Partners:** Anna (60% - strategy, sales) and Ben (40% - design, delivery). **Capital:** Anna contributes $30K cash. Ben contributes $10K cash + existing client relationships. **Salaries:** Anna $5K/month, Ben $4K/month before profit split. **Exit:** 90-day notice, buyout at 3x trailing 12-month net profit, payable over 18 months. **Decision threshold:** Unanimous for anything over $5K.

---

## Anti-Patterns

- **50/50 split with no tiebreaker** — equal partnerships with no deadlock resolution mechanism lead to paralysis. Define a tiebreaker.
- **No exit provisions** — the most important part of a partnership agreement is how to end it. Never skip this section.
- **Handshake agreements** — "we trust each other" is not a legal strategy. Write it down.
- **Same lawyer for both partners** — each partner should have independent legal review to protect their interests.
- **No valuation method for buyouts** — agreeing to "fair value" without defining how it is calculated leads to fights. Pick a method now.

---

## Recovery

- **Already in partnership without an agreement:** Create one immediately. It is harder to negotiate after the business is running, but essential.
- **Partners disagree on terms during drafting:** This is the time to discover incompatibilities. Better to walk away now than after launching.
- **Unequal contributions:** Structure with vesting, guaranteed payments, or adjusted profit splits to reflect different contribution types.
- **Partner wants to leave:** Follow the exit provisions. If no agreement exists, consult an attorney immediately to negotiate a separation.
