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What is a Partnership Agreement?
A Partnership Agreement is a written contract between two or more partners in a for-profit business. The agreement outlines the rights and duties of each partner.
A Partnership Agreement should address issues like:
- Partner contributions
- Profit and loss distribution
- Admissions of new partners
- Exiting partners
- Dissolving the partnership
- Accounting
- Decision-making
- Partnership meetings
LawDepot's Partnership Agreement template helps you manage your general partnership. Partners can be individuals, companies or limited partnerships. In order to establish a partnership, you must be at least 18 years old, a Singapore citizen, Singapore permanent resident or an eligible Foreign Identification Number (FIN) holder.
A Partnership Agreement is also known as a/an:
- General Partnership Agreement
- Partnership Contract
- Articles of Partnership
- Business Partnership Agreement
Why is it important to have a Partnership Agreement?
Having a Partnership Agreement is important because it helps reduce or avoid conflict between the partners. It sets the partnership's rules and can act as a guide for resolving disputes. The more specific and detailed the agreement is, the less room there is for confusion over roles, responsibilities or policies.
The Partnership Agreement also lets the partners decide their own specific arrangements. If a partnership doesn't have an agreement in place to address certain matters, those matters are then entirely governed by the Partnership Act 1890. Doing so might not always be what's best for your business.
For example, an agreement lets the partners specify how profits and losses are distributed amongst them. Without an agreement, the partners will share the profits and losses equally.
A Partnership Agreement helps to avoid conflict which may arise between the partners. Where the terms of a partnership are not clearly set out and recorded, disputes may arise over ownership division, the roles, and responsibilities of the partners, and the division of assets upon termination of the partnership.
Can I draft my own Partnership Agreement?
Yes, you are allowed to draft your own Partnership Agreement. By going through LawDepot's questionnaire, you can ensure you have a legally sound draft agreement covering all your partnership's most important details.
How do I register a partnership?
Partnerships in Singapore must be registered with the Accounting and Corporate Regulatory Authority (ACRA). To register your partnership, you need to submit your online application to BizFile.
All the partners need to consent to the registration before it can go through. Partners also need to ensure they have enough funds in their Medisave account to register the partnership.
How do you end a partnership?
Your Partnership Agreement will give you and your partners multiple options for ending the partnership:
- Picking a specific date that it will end (fixed-term)
- A partner withdrawls from the partnership
- Through a unanimous or majority vote
Unless your Partnership Agreement specifies otherwise, the Partnership Act 1890 also states that a partnership will dissolve if:
- Any partner dies or becomes incapable of performing their duties
- Any partner files for bankruptcy
- An event occurs which makes the business of the firm unlawful
How do I write a Partnership Agreement?
You can easily create a Partnership Agreement for a business in Singapore by filling out LawDepot's questionnaire. Using our template will ensure you complete the necessary steps.
Step 1. Provide basic details about the partnership
Start your Partnership Agreement by providing basic details about your business, such as:
- The business name
- Partnership start date
- Purpose (e.g., automobile restoration, retail, food, and accommodations)
- Street address, town, and postal code
You need to register your business name with the Singapore Accounting and Corporate Regulatory Authority (ACRA). The name you choose can’t be identical to any other reserved or registered business name or undesirable in the Registrar’s opinion.
Step 2: Specify how long the partnership will last
Your partnership can continue indefinitely or have a fixed term and end on a specific date.
Most partnerships last until the partners decide to end it or an intervening event causes them to dissolve it. However, your circumstances might allow you to know when your partnership will end. In that case, choose a fixed term.
Step 3: Include details about the partners
The Partnership Agreement needs to include each partner’s name, address, and capital contributions. Also, specify whether the partner is an individual, company, or limited liability partnership.
Singapore allows a maximum of 20 partners unless it’s a professional partnership that practices a regulated profession. In that case, there’s no limit on the number of partners.
Examples of regulated professions include:
A partner’s capital contributions are the amount of cash, resources, or services they bring to the partnership. Provide an accurate description, including quantities and amounts.
Step 4: Outline how profits and losses are distributed
Decide if profits and losses will be distributed among the partners equally, in proportion to their capital contributions, or based on a fixed percentage for each partner.
If you choose a fixed percentage, the partners’ total portions need to equal 100%.
Step 5: State whether additional partners are permitted in the future
If your partnership will allow the addition of new partners, state if their admittance requires a majority or unanimous vote from the partners. Under the Partnership Act, a unanimous vote is required.
Step 6: Outline how a partner can voluntarily withdraw from the partnership
The withdrawal of a partner can have severe consequences for a partnership, especially when it's unexpected. That's why the exiting partner needs to submit a notice of withdrawal to do so.
Your Partnership Agreement should specify how much notice is required (e.g., three months, six months, one year, or two years) to withdraw. Your agreement can also include a non-compete clause that prevents the withdrawing partner from working for your business competitors.
Under the Partnership Act, a partnership automatically dissolves when a partner exits. However, you can state in your agreement that the partnership will continue doing business together if at least two partners remain.
Step 7: Specify what happens when the partnership dissolves
A Partnership Agreement should have guidelines for dissolving the partnership. Beyond setting an end date or dissolving when a partner leaves, the partners can also take the matter to a vote.
Your agreement should state whether a majority or unanimous partner vote is required to dissolve the partnership.
When a partnership dissolves, its affairs must be wound up, assets liquidated, debts paid, and the surplus divided among the partners.
It should also specify if the partners will distribute the company’s assets:
- Equally amongst them
- In proportion to each of their capital contributions
- Based on a fixed percentage
Step 8: Outline accounting details
Your Partnership Agreement needs to specify accounting details like:
- The date the financial year ends
- Whether partners receive remuneration (in addition to their share in the profits) for the work they’ve done
- Which financial reports you want annually
In addition to an income tax report, many partnerships also like to have a:
- Supporting income statement
- Balance sheet
- Cash flow statement
- Profit and loss summary
Step 9: Determine who will manage the partnership
Determine whether all the partners or a managing partner will be responsible for the partnership’s overall management and day-to-day operations.
If you have a managing partner, specify which partner is in the role and whether a majority or unanimous partner vote is required to remove them.
Step 10: Specify how the partnership will make important decisions
Outside of the day-to-day decisions that a managing partner is trusted to make, the partners will put the most important decisions to a vote.
Specify in your agreement whether financial and business decisions will be determined with a majority or unanimous vote. Remember that a unanimous vote gives each partner veto power.
For decisions regarding the partnership, also state whether the votes will be based on the proportion of capital contributions, in proportion to profit share, or if each partner will receive an equal vote.
Step 11: Determine who has the authority to sign contracts
Each partner typically has the authority to enter into a contract on the partnership's behalf as long as it's reasonable, given its usual business activities.
However, you can also put each contract to a vote or have the managing partner be the only partner with signing authority.
Step 12: State how often the partners will hold partnership meetings
State if the partners will hold partnership meetings weekly, monthly, quarterly, annually, or as required.
You’ll also need to determine if any partner can call a special meeting or if it requires a majority of the partners.
Step 13: Decide which decisions require unanimous consent
Requiring unanimous consent gives each partner the power to veto a decision. There might be some decisions that come with more risk for one partner than it does the others for a variety of reasons, and that’s when requiring unanimous consent is appropriate.
Some decisions that your partnership might want to require unanimous consent for include:
- Signing partnership cheques
- Assuming new debts over a certain amount
- Assuming new expenses over a certain amount
- Selling partnership assets over a certain value
- Hiring highly paid employees
- Firing employees
- Making decisions affecting the unusual use or lending of partnership equipment
- Releasing partnership claims except for payment in full (i.e., a waiver or release of any significant debt owed to your partnership)
Step 14: Include any additional clauses
You can write additional clauses into your Partnership Agreement if there are any unique topics or issues that it doesn’t already address.
Step 15: Sign the agreement
Finish your agreement by dating and signing it. Space is provided at the bottom of the agreement for each partner’s signature.
Partnership Agreements don't legally require witnesses, but it can be good to include them to reduce the chances of its execution being challenged.