Informal Partnership Agreement

Partnerships are more than just two, three or several people working together. A partnership is legal arrangement: it can be complex, as in a limited liability partnership; it may be a written general-partnership agreement; or you can simply agree to work together and share the profits without writing anything down. If you decide to forgo a formal partnership agreement, your working arrangement will be governed partly by your state's laws.


The first thing to consider is whether what you have is really a legal partnership. You can find this out by checking your state's laws. In North Carolina, for example, a partnership automatically exists when two or more people co-own a business for profit and haven't created some other business structure. Receiving a share of the profits is proof of partnership, except when the money is paid out to settle a debt, pay an employee, pay the rent or similar purposes.

Contributions and Rewards

One thing partners have to agree on is what each of them will bring to the table: Your contribution, for example, could be cash or a vehicle; another partner might provide sales expertise, or contribute added cash. Equally important is how the profits will be divided up -- equally, or in proportion to your contributions, for example. State law may dictate some of your procedures; if the law doesn't suit your needs, you'll have to draft a formal agreement.


You can't run a business without making decisions, but partners may not agree on what the right decision is. You and your partners should have a clear understanding how you will resolve disputes: for example, by reaching unanimous agreement; by majority vote; or by allowing individual partners to make some decisions on their own. State law will control some of your arrangements, the Nolo legal website states. For example, unless you have a written agreement saying otherwise, the law lets any partner commit the business to a debt or a contract, even if the rest of you oppose it.


Sooner or later one of you may decide to leave the partnership, or become too ill to participate, or die; if you want your business to endure, you need to agree on what happens next. This is another area where a written agreement -- guaranteeing that if one partner leaves, the others can buy out her share, say -- may give you more certainty than an informal arrangement. Without an agreement, state laws may dictate what happens to the partnership when one partner leaves or dies.