What should I include in a business partnership agreement?
Quick answer
Arizona partnership agreements are governed by A.R.S. § 29-1003, which limits what the agreement can override — it cannot, for example, eliminate the partnership's duty of loyalty or care, or unreasonably restrict a partner's access to the partnership's books and records. Beyond those limits, Arizona law lets partners set their own terms for profit-sharing, management, and admitting new partners, filling in with default rules wherever the agreement is silent — ClearStatute doesn't yet have § 29-1003's full statute text published as its own page, so the citation above links to the official Arizona Legislature version instead.
A.R.S. § 29-1003
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Based on the Arizona sources provided, here's what they indicate you should address in a business partnership agreement. Note that these sources describe what an agreement may govern and the default rules that apply when the agreement is silent — they are not a formal checklist of required contents.
1. Profit and loss allocation
For a limited partnership, profits and losses must be allocated among partners (and classes of partners) in the manner provided in writing in the partnership agreement; if not addressed in writing, they are allocated based on the value of each partner's contributions as shown in partnership records [3]. For a general partnership, the default rule is equal profit shares and losses proportional to profit shares — so the agreement should specify shares if you want something different [4].
2. Contributions and partner accounts
Each partner's account is credited with their contributions (money plus property value, net of liabilities) and share of profits, and charged with distributions and loss shares [4]. The agreement should address capital contributions, since partners are entitled to reimbursement for advances beyond the capital they agreed to contribute, and such advances accrue interest as loans [4].
3. Management and decision-making
By default, each partner has equal management rights, ordinary-course matters are decided by majority vote, and acts outside the ordinary course — plus amendments to the agreement — require unanimous consent [4]. In a limited partnership, the agreement may grant general partners voting rights on a per capita or other basis [6], and may specify the number or percentage of partners needed to approve major transactions such as a plan of merger [7].
4. New partners and partner compensation
By default, a person may become a partner only with the consent of all partners, and partners are not entitled to remuneration for services (except reasonable compensation for winding up) [4]. If you want different arrangements, they should be stated in the agreement.
5. Limits you cannot waive
Whatever you include, the agreement cannot: vary partner information/statement rights except to eliminate copy duties; unreasonably restrict access to books and records; eliminate the duties of loyalty or care or the obligation of good faith (though it may define categories of permitted activities or prescribe performance standards); vary the power to dissociate except to require written notice; restrict the rights of non-partners; or vary the law applicable to a limited liability partnership [1].
6. Additional notes
A partnership agreement may be written, oral, or implied under Arizona law [2] — though certain provisions (like limited-partnership profit allocation) must be in writing to control [3]. For limited partnerships, partners may also lend money to and transact business with the partnership unless the agreement provides otherwise [5].
The provided sources do not cover topics like dispute resolution, buyout terms, or dissolution mechanics in detail, so this is a partial answer. Consider consulting a licensed Arizona attorney to draft or review your agreement. Related questions
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AI-Generated Information. Consult a licensed attorney for official legal advice.
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