Partnership Agreement in Delaware
A Partnership Agreement is also known as:
Business Partnership Agreement
General Partnership Agreement
Articles of Partnership
Title 8 of Delaware’s Code stipulates that partners in legal partnerships can adopt Partnership Agreements. This code stipulates that the Partnership Agreement document details the relationship between the partners; specifically, the general and the limited partners, and their relationship with the partnership itself. A Partnership Agreement is not a legally required document, but it is recommended for the seamless operations of the business.
If you are ready to draft a Partnership Contract, the first step is to download our printable and editable free Delaware Partnership Agreement. This legal Partnership Agreement template offers a detailed overview of what should be in your Partnership Agreement to ensure ease of daily operations and improve the success of the business.
Note that the Partnership Agreement in Delaware is legally binding, and the Partnership Agreement doesn’t require notarization to be legally enforceable – it only needs the signatures of the partners.
Essential Sections of the Delaware Partnership Agreement
As an agreement between at least two people going into business together, the Partnership Contract must have clauses that stipulate different functions and conditions that ensure the continuity of the business. These clauses include:
Financial contributions, rights, and the allocation of profits and losses
Partner authority and responsibilities
Competition and Involvement in business operations
Partner withdrawal or death
Dissolution of partnership
This clause gives directions on all matters relating to the partners’ capital (and cash) contributions, and the resultant ownership percentage based on their capital contributions.
One of the important financial aspects covered is the allocation/distribution of profits and losses. The Partnership Contract stipulates whether the profits and the losses of the partnership will be distributed based on a fixed percentage (predetermined in the contract), an equal share to all partners, or if the profits and losses will be based on the capital contributions of each partner.
This clause pertains to the authority of the partners, including what the partners can and can’t do, as well as the legally binding contracts they can get into on behalf of the partnership, and the contracts they cannot get into. This section further outlines the limitations on the authority of the partners.
Involvement in the Business and Competition
The Partnership Contract might also include different provisions on matters that relate to the time and the activities that each partner must give and engage in the business. This section also features provisions and limitations to the abilities of the partners to engage in separate businesses in direct competition with the partnership business.
Which matters call for a vote? Are there big issues that can only be resolved or decided through voting by the partners? This section addresses the number of votes each partner gets. Are the votes dependent on the value of the capital contribution, the profit share, or does every partner ger an equal vote, regardless of their capital contributions? This clause should also address the items that can be approved through a minority vote and the ones that will only pass through a majority vote.
The IRS treats partnerships as taxable entities, auditing these businesses at the partnership rather than the individual level. The Partnership Contract should address matters on tax elections and name a tax representative for the partnership to represent and act on behalf of the partnership.
The Business Partnership Agreement addresses the resolution of disputes between the partners. The contract must have a mediation clause to compel the partners to seek professional mediation services from independent/certified third parties to help in the resolution of the conflict.
Partners’ Withdrawal, Termination or Death
The legal Partnership Contract stipulates the conditions to be met for withdrawal from the partnership, handling of the withdrawing partner’s stake, and the buyout processes, where necessary. This clause also addresses the steps following the death of a partner, as well as the actions that would necessitate the termination of a partner’s stake in the partnership.
Dissolution of Partnership
This section of the Contract stipulates the conditions/terms for the dissolution of the partnership. Some of these conditions include the death of a partner, bankruptcy, or meeting set goals.
Our site helps you create a Delaware Partnership Agreement. We offer free on-line templates and Partnership Agreement samples that make it easy. Simply fill in the information above to get started.
Whether you’re doing business in Dover, New Castle, Wilmington, Newark, Rehoboth Beach, Lewes, Milford, or any other city in Delaware, you can download our free Partnership Agreement form and start creating yours today.