Business Partnership Agreement

Not legally required (ByteStart SERP confirms) — you have a general partnership the moment two people start a business together for profit per RUPA §202(a) "association of two or more persons to carry on as co-owners a business for profit", even with zero paperwork. But without an agreement, your state's RUPA defaults apply (37 states + DC): equal profit split regardless of capital contribution per RUPA §401(b) (a partner who put in $10K splits 50/50 with one who put in $200K), every partner has equal management vote per §401(j), partnership dissolves on any partner's death/withdrawal per RUPA §801. Harding Evans (SERP) cites equal-share + dissolution defaults as the #1 SMB partnership trap. A written agreement overrides all these and is essential for any partnership beyond the simplest. Pricing: Docusign (SERP-1) $30/mo, LegalTemplates (SERP-2) $39 + $39/mo, LawDepot (SERP-4) $39/mo, US Chamber (SERP-9) free article + zero PDF, Cornell Cooperative Extension (SERP-3) free PDF blank-only, business-formation attorney $500/hr ($1,500-$5,000 for a custom partnership agreement); iFillPDF generates the same RUPA + IRC §704(b)-compliant agreement with Schedule A capital + buy-sell + dissolution waterfall for $0.

A general partnership is a pass-through entity — the partnership itself does not pay federal income tax. It files Form 1065 (informational return) and issues each partner a Schedule K-1 reporting their share of income, deductions, and credits. Partners report K-1 amounts on their personal Form 1040 (Schedule E) and pay self-employment tax on their share via Schedule SE.

Under RUPA, a general partnership dissolves on any partner's withdrawal unless the agreement says otherwise. A well-drafted agreement converts this to a "buy-out" — remaining partners purchase the leaving partner's interest at a pre-agreed valuation (book value, multiple of earnings, or independent appraisal). Without that clause, the entire partnership winds up: assets sold, debts paid, residual split.

Yes — joint and several personal liability under RUPA §306(a) for ALL partnership obligations (contract + tort), no liability shield whatsoever. This is the #1 reason to consider an LLC ($50-$800 state filing + $100-$800/yr franchise tax — DE $300, CA $800 minimum) or LLP ($200-$800 annual registration). One partner signs a $200K equipment lease without authority but with apparent authority under §301 → all partners personally on the hook → creditor can garnish your home equity, brokerage account, IRA up to ERISA cap. Worse: under §306(c), an "innocent" partner is also liable for another partner's tortious acts within the scope of business (a partner crashes the company truck → all partners liable for the $1M settlement). Compare: an LLC under state RULLCA gives full charging-order protection; an LLP under RUPA §306(c) shields each partner from other partners' negligence (still liable for own acts + contract debts) — standard for law firms, accounting firms (Big 4 are LLPs), medical practices.

A general partnership has no liability shield — every partner is personally liable for everything. A Limited Liability Partnership (LLP) requires state registration (annual fee, often $200–$500) and protects each partner from personal liability for other partners' negligence or misconduct (still liable for own acts and contractual obligations of the partnership). LLPs are the standard for professional firms (law, accounting, medicine) where partners want protection from each other's malpractice.