Free Guide to Partnership Agreement for LLC Template

A partnership agreement for LLC (Limited Liability Company) is a legal document. It displays the terms and conditions of a partnership between two or more individuals or entities.

The partnership agreement for LLC template is an essential document for any LLC. It helps to define each partner’s roles, responsibilities, and obligations. A well-written partnership agreement can help prevent misunderstandings, disputes, and legal issues that may arise in the future.

In this article, we will provide the key elements of a partnership agreement for LLC. Read on for a template that you can use as a guide.

What Is an LLC?

LLC is an abbreviation for Limited Liability Company. This legal organization combines a corporation’s liability protection with the tax benefits and flexibility of a partnership. An LLC is a distinct legal entity from its owners, who are referred to as members. It has the authority to engage into contracts, hold property, and do business in its own name.

One of the primary benefits of an LLC is that it provides its members with limited liability protection. This implies they are not personally accountable for the company’s debts and liabilities. This implies that if the LLC is sued or declares bankruptcy, the members’ assets are typically safe from creditors.

Key Elements of a Partnership Agreement for LLC

Name and Purpose of the LLC

The first section of the partnership agreement should clearly state the name of the LLC and its purpose. This section should also include the business address, email address, phone number, and other relevant contact information.

Contributions of Partners

The partnership agreement should specify the contributions made by each partner, whether in cash, property, or services. Each partner’s contributions will determine their ownership percentage in the LLC. This section should also include the valuation method used to determine the value of non-cash donations.

Allocation of Profits and Losses

The partnership agreement should define how you allocate profits and losses among the partners. Typically, you can distribute profits and losses based on each partner’s ownership percentage. However, the agreement may also specify a different allocation method, such as a preferred return or an equal distribution.

Management and Decision-Making

The partnership agreement should outline the management structure of the LLC and how it makes decisions. This section should specify the roles and responsibilities of each partner. It should define the decision-making process, such as a unanimous or majority vote.

Transfer of Ownership

The partnership agreement should address the LLC’s ownership transfer, including the sale or transfer of a partner’s interest in the company. This section should specify the conditions under which a partner can transfer ownership. It should include the consent of the other partners or a right of first refusal.

Dissolution of the LLC

The partnership agreement should specify the conditions under which the LLC may be dissolved. This section should outline the process for winding up the affairs of the LLC, distributing assets, and paying off any outstanding debts or obligations.

Dispute Resolution

The partnership agreement should include a dispute resolution mechanism in case of disagreements or disputes between the partners. This section should specify the process for resolving disputes, such as mediation or arbitration, and define the governing law.

Confidentiality and Non-Compete

The partnership agreement should address issues of confidentiality and non-compete agreements. This section should specify the confidentiality obligations of the partners and any restrictions on competing with the LLC or soliciting its customers.

Term and Renewal

The partnership agreement should specify the term of the LLC and whether you will automatically renew it. This section should also include any conditions for renewal. It could be the partners’ consent or a change in the purpose of the LLC.

Miscellaneous Provisions

The partnership agreement should include any other miscellaneous provisions that the partners deem necessary, such as indemnification provisions, insurance requirements, or tax obligations.

Tips for Writing a Partnership Agreement for LLC Template

When drafting a partnership agreement for an LLC, it is essential to remember its unique characteristics. You should know the specific needs of the partners involved. Here are some tips to consider when writing a partnership agreement for an LLC:

Define the Contributions of Each Partner

This includes the initial capital contribution and any ongoing contributions, such as property or services. It is essential to allocate ownership percentages based on the contributions made by each partner.

Establish a Transparent Allocation of Profits and Losses

This should be proportional to each partner’s ownership percentage. Additionally, consider outlining how profits will be distributed and how losses will be handled.

Establish Management and Decision-Making Procedures

Clearly outline the decision-making process for both major and minor decisions. Consider establishing voting rights, quorum requirements, and tie-breaker provisions.

Address the Transfer of Ownership

It is essential to outline procedures for transferring ownership and how the value of the interest will be determined. Additionally, consider including buyout provisions and restrictions on transfers.

Plan for Dissolution

It is essential to consider how the LLC will be dissolved in the event of bankruptcy, the death of a partner, or mutual agreement. Outline procedures for winding up the business and distributing assets.

Address Dispute Resolution

Include provisions for resolving disputes, such as mediation and binding arbitration. It is essential to establish a clear process for resolving conflicts between partners.

Consider Confidentiality and Non-Compete Clauses

Include provisions to protect the confidential information of the LLC and to restrict competition from partners during and after the term of the agreement.

Set Term and Renewal Provisions

Define the length of the partnership agreement and include provisions for automatic renewal or termination.

Include Miscellaneous Provisions

Consider including provisions that address essential topics such as amendment procedures, notice requirements, and waiver provisions.

Seek Professional Legal Advice

It is important to consult with an attorney specializing in business law to ensure your partnership agreement is legally sound. A lawyer will fit it into the specific needs of your LLC.

Partnership Agreement for LLC Template

[Name of LLC]

This Partnership Agreement (the “Agreement”) is made and entered into on [Date], by and between [Name of Partner 1], a [Type of Entity] and [Name of Partner 2], a [Type of Entity] (collectively referred to as the “Partners”).

Name and Purpose of LLC

The name of the LLC shall be [Name of LLC]. Its purpose is [Purpose of LLC]. The business address of the LLC shall be [Address].

• Contributions of Partners

The Partners agree to make the following contributions to the LLC:

• [Name of Partner 1]: [Contribution] in the amount of [Amount] and [Services] valued at [Value]
• [Name of Partner 2]: [Contribution] in the amount of [Amount] and [Property] valued at [Value]

The total contributions to the LLC shall be [Total Contribution]. The percentage of ownership in the LLC shall be allocated based on the contributions made by each partner.

Allocation of Profits and Losses

Profits and losses of the LLC shall be given to the Partners in the measure to their percentage of ownership in the LLC. The Partners agree to distribute profits to themselves annually unless otherwise agreed upon in writing. The Partners shall bear losses in accordance with their respective percentage of ownership.

Management and Decision-Making

The management of the LLC shall be vested in the Partners, who shall have equal authority and responsibility. Major decisions affecting the LLC shall require the unanimous consent of the Partners, including but not limited to:

• Entering into contracts or agreements with a value of $[Amount] or more
• Borrowing money or incurring debt on behalf of the LLC
• Acquiring or disposing of assets with a value of $[Amount] or more
• Hiring or firing employees
• Making distributions to the Partners

A majority vote of the Partners shall make minor decisions. In case of a tie, the matter shall be resolved by the casting vote of [Name of Partner 1/2].

Transfer of Ownership

A Partner may not transfer or sell their interest in the LLC without the written consent of the other partner. If a Partner wishes to share their interest, they must first offer it to the other partner at fair market value. If the other partner declines, the transferring partner may offer it to a third party, subject to the approval of the remaining partner.

Dissolution of the LLC

The LLC may be dissolved by mutual agreement of the Partners, by the bankruptcy or death of a Partner, or by operation of law. In the event of dissolution, the LLC shall be wound up, and the assets distributed among the Partners. This will be in proportion to their percentage of ownership.

Dispute Resolution

Any disputes between the Partners arising out of this Agreement or the operation of the LLC shall be resolved by mediation. It should be followed by binding arbitration if necessary. The mediation and arbitration shall be conducted in accordance with the rules of the [Name of Arbitration Service].

Confidentiality and Non-Compete

The Partners shall maintain the confidentiality of all confidential information of the LLC. They shall not use such information for any purpose other than the operation of the LLC. The Partners agree not to compete with the LLC during the term of this Agreement. And also, for a period of [Number] years following its termination.

Term and Renewal

The term of the LLC shall be [Number] years, commencing on [Date]. The LLC shall be automatically renewed for successive [Number]-year terms, unless terminated by mutual agreement of the Partners or by operation of law.

Miscellaneous Provisions

• Any earlier discussions, talks, and agreements between the Partners are therefore canceled and replaced by this Agreement.
• The laws of [State] will apply to this contract and control its interpretation.
• No oral modifications to this Agreement will be valid unless made in writing and signed by both Parties.
• Any notice required by this Agreement must be in writing and will be deemed provided when personally delivered. Send it through recorded mail to the registered address the Company has on file for the partner.

In Summary

A partnership agreement for an LLC is an important legal document that outlines the terms and conditions of the partnership between the partners involved.

By carefully considering the unique needs of the LLC and the specific needs of the partners, you can draft a partnership agreement. This will protect the interests of all parties involved and ensures the long-term success of the business.