A well-drafted Agreement to Form a Partnership will:

  • Indicate whether the nature of the partnership will include limited partners
  • Indicate which partners will have what management powers and control
  • Detail the intended capital contributions and subsequent distributions of profit
  • Require compliance with state filing requirements
  • Provide a framework for the settlement of disputes between partners
  • Prevent a partner from selling his stock to a third party without first offering it to existing partners
  • Provide a framework for the purchase of a partnership interest by the remaining partner in the event a shareholder dies
  • Prevent a partner from competing against the partnership
  • Require partners to maintain the confidentiality of all customer names and other business records
  • Prevent a partner from impairing the goodwill of the partnership
  • Prevent a partner from soliciting customers of the partnership for new partnership business


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An Agreement to Form a Partnership is a good way to pool the prospective partners' thoughts and intentions as to how they want to participate in the operation of a business and share in its profits. Generally speaking, an Agreement to Form should operate as a precursor to an actual Partnership Agreement with many, if not all, of the same provisions addressed here as there.

Capital Investment

The capital of the partnership was contributed in cash: A separate capital amount shall be maintained for each partner.

Profit & Loss

Each partner's share of profits and losses is usually set out in a written partnership agreement. The net profits or losses of the partnership may be divided equally between the partners. The profits and losses of the partnership are usually determined in the manner in which the partnership reports its income and expenses for federal income tax return purposes.

Management, duties, and restrictions

Provide details of each partner's respective rights in the management of the partnership business, and the amount of time expected to be devoted to the conduct of the business.


Describes who can make disbursements from the partnership bank account and what additional signatures are necessary. All banking transactions should be conducted by and/or require the signature of two or more of the partners.


The partnership books and records should be maintained at the principal office of the partnership, and each partner should have access them.


The term of existence for a partnership is not perpetual and is usually determined by the participation of all the partners.

Buy Sell Provision

Upon the departure, disability, death or incapacity of a partner, a partnership might, by law, be dissolved, forcing the remaining partners to divide any assets and profits among each other and decide whether to start a new partnership. A buy-sell provision anticipates this possibility and dictates how the remaining partners will buy, acquire and distribute the departing partner's interest. A buy-sell provision can also dictate who can buy a departing partner's share of the business and what price will be paid for a partner's interest.

Admission of Additional Partners

The agreement should detail whether and under what circumstances new partners may be admitted including what kind of capital contribution will be required.


In the event any part, portion or provision or paragraph of this Prenuptial Agreement is declared void or invalid by any legislative act or judicial determination, the remaining portions of this Prenuptial Agreement shall not be affected and thereby it shall remain in full force and effect and be binding upon the parties hereto.

Mediation and Arbitration

Mediation and Arbitration should always specify a location in Client's jurisdiction (preferably, in the same county where they run their business). Mediation is a non-binding way to settle the dispute quickly and amicably. If unable to settle in mediation, arbitration is first option available. Arbitration is the preferred alternative to litigation because of speed, cost, and ability to maintain low profile (no info is publicly available).

Governing Law

Always stipulate that the contract will be governed under whatever law the Client ordinarily conducts business. Always make sure that venue and jurisdiction are as convenient to client as possible.

No Modification or Waiver

No modifications except those specifically agreed upon by the parties in writing. Any waiver of a term or provision will not act as a waiver of any other provision.

Entire Agreement

This agreement constitutes the entire agreement of the parties and may be modified only in a writing executed by both parties.


Notices should always list the current and best addresses where each party may contact the other for whatever reason.

Restrictive Covenants
Such restrictive covenants offer the Partnership statutory remedies for violation and often prevent a Shareholder from unfairly competing against it or disclosing its confidential business information. As always, ensure any such restrictive covenant is within statutory parameters.


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