Partnership Agreement Checklist
Every business with two owners has an agreement, whether or not anyone wrote it. Two people who run a business for profit as co-owners form a partnership "whether or not the persons intend to form a partnership" (Uniform Partnership Act (1997) §202), and the statute then supplies the terms they did not: equal shares of profit, equal votes, no pay for work. The checklist below lists what to decide instead, for the structure and situation chosen, with the default that applies when the agreement is silent.
Build the checklist
Choose how the business is set up and what applies to you. The list shows each clause to settle, why, and what the law decides if the agreement is silent.
General information, not legal advice. Sections cited are the Uniform Partnership Act (1997) and the Revised Uniform Limited Liability Company Act; your state numbers its own code, and some states adopted older acts or changed the defaults. A lawyer in your state should read the actual agreement.
How to use the list
Choose the structure first, because the defaults differ more than most owners expect. Then tick every situation that applies; each one adds clauses or a note on an existing one (two owners at 50/50 makes the deadlock clause the most important in the document; unequal capital changes what an equal split by default means in money). Tick each clause as it is settled, then copy the list as text into an email to the lawyer drafting the agreement, or print it for the meeting. Nothing typed or ticked leaves the page.
Where the defaults come from
"If the agreement is silent" lines quote the model acts most states have built their law on:
- General partnerships and LLPs: the Uniform Partnership Act (1997), often called RUPA. Section numbers are the 1997 text, which most states adopted; the version the Uniform Law Commission harmonized in 2013 moves some of them (the partners' duties are §404 in 1997 and §409 in 2013).
- LLCs: the Revised Uniform Limited Liability Company Act (RULLCA). Fewer states have adopted it than RUPA, and Delaware has an LLC act of its own, so the LLC defaults are the likeliest to differ where the business is organized.
- Corporations: the Delaware General Corporation Law, the usual home for a company that plans to raise venture money. The board manages the business (§141(a)), and a restriction on transferring shares binds a holder only if it is noted conspicuously on the certificate or the holder agreed to it (§202).
The defaults that cause the most trouble
Profit follows heads, not money. Under RUPA §401(b) each partner is entitled to an equal share of the profits and bears losses in the same proportion. Say one partner puts in $90,000 and the other $10,000, and they never write down a split: the profits are shared 50/50. RULLCA does much the same for an LLC's distributions (§404(a)). How to split profits in a partnership works through the alternatives.
Nobody is paid for working. A partner "is not entitled to remuneration for services performed for the partnership" except for winding it up (RUPA §401(h)). Where one owner works full time and the other does not, a salary or guaranteed payment has to be agreed. How business partners pay themselves covers the options and their tax treatment.
Two owners can deadlock on anything. Ordinary matters go by majority (§401(j)), and with two owners a majority is both of them. Without a mechanism the remaining routes are one partner leaving or a court: under RULLCA §701(a)(4)(B) a court may dissolve an LLC when it is "not reasonably practicable" to carry on. Deadlock clauses for a 50/50 partnership compares the mechanisms.
An LLC member who leaves is stuck. A partner who leaves a partnership is owed a buyout price under RUPA §701. A member who leaves an LLC under RULLCA becomes a mere transferee (§603) and dissociation "does not entitle the person to a distribution" (§404(b)). Without a buyout clause, the departing member keeps an interest with no vote that nobody is obliged to buy. The partner buyout calculator prices one when the agreement does provide it.
Death is a transfer the agreement did not plan. Death dissociates a partner (RUPA §601(7)(i)) or member (RULLCA §602(7)(A)), and without a buy-sell agreement the estate's rights depend on the entity. Funding the buyout with life insurance is common, and since Connelly v. United States (2024), insurance the company owns to redeem a deceased owner's shares can raise the company's value for estate tax, which favors cross-purchase arrangements in some cases. Buy-sell agreements for business partners explains the choice.
What the checklist does not do
It lists the questions; it does not answer them, and it is not an agreement. The strongest objection to any checklist is that it can make a document look complete when the hard clauses are still vague: a buyout clause that says the price will be "fair market value as agreed" settles nothing. Each item ticked should end with a number, a name, a date or a formula. For wording, what to include in a partnership agreement and writing the exit clause have sample clauses; mediation vs arbitration covers the dispute clause, and non-compete rules after a partnership ends what a restriction can actually enforce. Owners who already run a business without anything in writing should start with what the law fills in and liability for a partner's debts.
General information, not legal advice. Statutes and their numbering differ by state, and some states changed these defaults or adopted older versions of the acts. A lawyer in your state should read the actual agreement.