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Define capital contributions, profit share, decision rights, and exit terms before launching a partnership.
A partnership agreement is the founding document of a general partnership or business partnership. It records who owns what, how profits are split, who can make what decisions, and what happens when a partner wants out. Operating without one means falling back on the default provisions of the Partnership Act in your state — which are rarely what partners actually want.
Common situations where this document is the right tool for the job.
Two or more people are starting a business together without incorporating a company.
Existing business partners have been operating on a handshake and want to formalise.
A new partner is joining an existing partnership.
Partners want to clarify decision-making authority and profit splits.
Capital contributions are unequal and partners need to record that.
Partners want a pre-agreed exit and buy-out mechanism in case of dispute.
The essential provisions every partnership agreement should include.
Full legal names of each partner, the business name, ABN, principal place of business, and the nature of the business.
What each partner contributes (cash, equipment, IP, sweat equity) and how contributions are valued. Records each partner's capital account.
The percentage split of profits and losses among partners, which may differ from capital contribution percentages. Include how and when distributions are made (monthly, quarterly, annually).
Who makes what decisions. Usually day-to-day decisions are by any partner, while major decisions (borrowing, new partners, sale) require unanimous or supermajority approval.
Obligations to act in good faith, not compete with the partnership, and not use partnership assets for personal benefit. Any time commitment expected of each partner.
Whether partners can draw regular amounts against their profit share (and at what rate), and whether any partner is paid a salary for additional operational work.
Process for admitting a new partner (usually unanimous consent) and removing a partner (voluntary exit, death, incapacity, or expulsion for cause).
How a departing partner's share is valued (book value, independent valuation, formula) and how the remaining partners can buy it out. Typically payment over 2-5 years.
Mandatory negotiation, then mediation, then arbitration or courts. Some agreements include a Texas shoot-out or Russian roulette clause for deadlocks.
What triggers dissolution of the partnership (unanimous decision, expiry of term, bankruptcy of a partner) and how assets are distributed after debts are paid.
More partnerships fail because of disagreements about money and control than because of business failure. A partnership agreement forces the hard conversations up front, while partners still like each other.
Without a partnership agreement, your state's Partnership Act fills in the gaps — and the defaults often do not match what partners assume (e.g. equal profit sharing regardless of unequal contributions). A written agreement overrides the defaults.
A pre-agreed buy-out mechanism means a partner can leave without tearing the business apart. Without one, disputes often end in forced dissolution and fire-sale of assets.
Banks, landlords, and major customers often want to see the partnership agreement before doing business. It also makes converting to a company or admitting new partners far simpler.
Yes. A partnership agreement is an ordinary commercial contract under Australian law. Electronic signatures on it are recognised as valid under the Electronic Transactions Act 1999 (Cth)and the state-based equivalents (e.g. Electronic Transactions Act 2000 (NSW), Electronic Transactions (Victoria) Act 2000, Electronic Transactions (Queensland) Act 2001).
Under section 10 of the Commonwealth Act, an electronic signature is valid if it identifies the signer, indicates their intent to be bound, and uses a method as reliable as appropriate in the circumstances. SignBolt captures timestamp, IP address, and signer identity — which meets this "reliable method" test for ordinary commercial signing.
Certain document types are excluded from electronic-signing provisions in some states (wills, statutory declarations in some contexts, land titles documents). A partnership agreement is not in those excluded categories — electronic signature is valid.
This page is general information, not legal advice. For high-value or unusual arrangements, obtain a one-off review from a qualified Australian legal practitioner.
Questions we get about the Partnership Agreement template.
No. A partnership agreement governs a general partnership (two or more people operating a business together without incorporating). A shareholders agreement governs the relationship between shareholders in an incorporated company. They share many concepts (profit share, decisions, exit) but the legal framework differs — partnerships are governed by state Partnership Acts, while companies are governed by the Corporations Act 2001 (Cth).
You need an ABN for the partnership and a business name registration (via ASIC) if the partnership trades under anything other than the partners' own names. The partnership itself does not need to be registered as a separate legal entity — it is simply the relationship between the partners. You will also need a partnership TFN and, if turnover exceeds $75,000, GST registration.
Yes. In a general partnership, each partner is jointly and severally liable for the debts of the partnership. That means a creditor can pursue any partner for the full amount of a partnership debt. This is why many partnerships convert to Pty Ltd companies as they grow — companies offer limited liability protection, which partnerships do not. A partnership agreement does not change this external liability; it only governs how the partners deal with each other internally.
A partnership itself does not pay tax. Instead, each partner's share of net partnership income is included in their individual tax return and taxed at their marginal rate. The partnership must lodge an annual partnership tax return showing the distribution to each partner. GST, PAYG withholding, and super obligations apply to the partnership itself.
Yes. The Electronic Transactions Act 1999 (Cth) allows electronic signing of commercial contracts, including partnership agreements. A SignBolt signed PDF with audit trail (timestamp, IP address, signer identity) satisfies the 'reliable method' test for identifying the signer and confirming their intent to be bound.
Under default Partnership Act rules, a partnership is dissolved on the death of a partner. This is rarely what surviving partners want. A partnership agreement should include a continuation clause (partnership continues among remaining partners) and a buy-out mechanism (surviving partners buy the deceased partner's share from their estate, often funded by partnership life insurance).
For most businesses generating meaningful revenue, yes. Pty Ltd companies offer limited liability protection, lower marginal tax rates on retained earnings, and easier capital raising. Partnerships are simpler and cheaper to set up but expose partners to unlimited personal liability. If the business might ever carry significant risk (client-facing, physical premises, employees), incorporation is usually the right call.
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