What to know about Business Partnership Agreement


Running a business setup can be very stressful on your own but going into a partnership agreement with someone or another business can help make things easier for you and your business.

Hi everyone my name is Timileyin and in this article I will be sharing with you on what you should know about an agreement when it comes to business partnership.


A partnership agreement according to business dictionary is a “written agreement between two or more individuals who join as partners to form and carry on a for-profit business.

 According to this dictionary, it states that this agreement consists of the nature of the business, capital contributed by each partner and their rights and responsibilities.

Some other sources say that this sort of relationship should include the following:

  • .       Duration of the partnership
  • .       How the partnership will be dissolved
  • .       How a partner can take his/her share of the agreement
  • .       Delegation of duties to each partner
  • .       Sharing pattern of profits and losses

Why should a business go into this Agreement?

Every business should think about going into an agreement with another enterprise at some point due to several reasons which I’m going to state here below.

1. To Stay away from tax problems:

This agreement is premised on the fact that each partner is aware of the tax update of the partnership with respect to profit distribution based on accounting practices

2. To outline the each partner’s duties:

This relationship is sealed with an agreement to let the contributors aware of the roles and responsibilities they are to perform.

3. To avoid law and obligation issues

      4. To create an atmosphere for dispute resolution

      5. To set a standard in which potentially new members need to attain before they enter the relationship:

      6.  In the event of death or the person being disabled:

This document should clearly state what will happen in the event of a member falling sick in terms of being disabled or the person dies.

Once that happens, there should have been a plan of who would take over and how it should be run.

   7. Termination of Agreement

In the event of one or all of the members splitting due to certain reasons, this agreement should tell what happens so as to prevent any sort of argument while doing so.

  8. The sharing pattern

The sole purpose of every business is profit and while different partners come together, they also come together to make more money.

The amount of money each member gets is always determined by the amount of input he or she makes to the partnership.

A business should go into an agreement when entering a partnership so as to know how much profit will be coming in and why that amount is given to the business.


  9.  Capital Investment

For any business agreement to be solid, there has to be an understanding of the amount each member must put in for the relationship to work.

Capital investment in this sense is mostly cash wise but sometimes expertise and network can also suffice.

Do you think you should create a business partnership agreement on your own without any formal knowledge about it? NO.

Why should you employ the services of an attorney to help create that partnership Agreement?

You may not believe me when I said you shouldn’t prepare this document yourself without having a formal understanding because it may be written in such a way that it’s only you that understand what’s written there.

Getting a professional to do the job and not just a DIY scheme will pay off eventually because it will save your relationship between partners and also save your business from law issues that would normally waste your time and money.

Read, practice and share



Komolafe Timileyin is a passionate entrepreneur that loves to solve entrepreneurial issues. He is also a blogger and an upcoming Engineer.

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