In the world of business, .have good partnership is the first award that you people got. The interaction between you and the customers has that will bring the up standarding business relationship.

“Great things in business are never done by one person they are done by a team of people.” (, Mark Zuckerberg, co-founder Chairman, and CEO Facebook ower).

Many small businesses such as professional practitioners, retail, service providers are organized as partnerships.
Partnerships are very essential in the business world and are in fact considered as the second stage in the evolution of the business first being a sole proprietorship.

A partnership is an agreement between two or more people who have decided to enter into business with the intention of earning profits.
Partnerships may be established formally by means of a partnership deed or agreement. The partnership agreement is a very important guide for partnerships to exist in harmony.

Partnership Agreement

Partnership Agreement, also known as a Partnership Contract, is a written agreement between two or more individuals who intend to form and carry on a business (known as partnership) for the purpose of making profit.

This document is a important foundation document for running a new business. The Agreement protects all the Partners involved in the business as it outlines the nature of the business, the money contributed by each partner and the rights and responsibility of the partners, etc. (In Nigeria, Ghana, South Africa), a Partnership is registered as a business name at the Corporate Affairs Commission.

There are two types of Partnership existing(eg) in Nigeria namely: the General Partnership and the Limited Liability Partnership. In a Limited Liability Partnership, the liability of all the partners is limited and they are not personally liable for debts incurred by the Partnership business. In General Partnership, all the partners are jointly and severally liable for all the debts incurred by the business and their liability also extends to both existing and previous partners of the business.

How to use this document

A Partnership Agreement can be created as a first step to outline the Partners’ responsibilities before the Partners start doing business together or after they have started doing the business already. In this document, the form filler must fill the following information:

  • Name of the Partnership: The form filler must enter the registered name of the Partnership. This is the name stated in the certificate of registration issued by the Corporate Affairs Commission. Partnership is usually registered as a business name.
  • Place of Business: This is the principal place of business of the Partnership.
  • Purpose of Business: This is the business the Partners intend to carry out in the Partnership.
  • Capital Contribution: This is the initial contribution the Partners are willing to make. It can be money, property, services, etc. The form filler is required to state the amount of money each Partner will be contribute and where the contribution is not in monetary form, state the type of contribution and the cash value of the contribution.
  • Profit and Loss Distribution: The form filler is required to state how the profits and losses will be distributed between the Partners.
  • Ownership Interest of the Partners: This is the percentage of the Partnership owned by each Partner.
  • Management and Voting Requirements: This describes how the Partnership will be managed, the type of votes required for admitting and removal of a Partner, making financial decisions, etc.
  • Dissolution of the Partnership: This outlines the circumstances in which the Partnership can be dissolved and how the remaining assets will be divided between the Partners.

After filling this document, all the Partners must sign the document and each Partner must give a person to witness the document. The witness who must be at least 18 years old, is required to hand fill the necessary information required and sign the document. All the Partners must have different witnesses.

After the document has been duly signed, every Partner must keep at least one copy each for record purposes

Further Different kinds of Business Agreement

● Names of the business partners
● Nature and kind of business
● Capital contributed by partners
● Interest on the Capital (if it exists)
● Salaries paid to the active partners
● Drawings to be made by the partners
● Interest on the drawings(if it exists)
● Duties of the partners
● Valuation of goodwill
● Duration of the partnerships

Benefits of Starting a Business Partnership

  1. Skills and Experience

Starting partnerships with people who have different qualifications gives the business potential to thrive.

2. Risk is Spread

With an increased number of business owners, the losses incurred are shared among many.

3. Effectiveness

Different minds encourage the creation of better products and services even if they are non profit or for profit.

4. HR Development

Different minds encourage the creation of better products and services even if they are non profit or for profit.

5. Stability and Impact

Competence among workforce will be encouraged and this will therefore enhance the staff’s professional skills.

Risks of Starting a Business Partnership

  1. Implementation Challenges

Day-to-day demands of delivering a partnership program as a collaborative venture, with all the additional management, tracking, reporting, and evaluation requirements that entails

2. Drain on Resources

The commitment of time and energy of key staff in partnership building and project development in addition to any additional financial or other resource contributions

3. Negative Reputation

When partnerships go wrong causing damage to the reputation or track record of individual partners by association.

4. Loss of Autonomy

The challenge of shared decision-making processes; the need for building consensus with partners before action can be taken and the implications of wider accountability (to other partners and to wider beneficiaries)

5. Unlimited Liability

Members have unlimited liability which implies that in the event of the business winding up the proceeds from the business assets cannot cover the obligations therefore partners are called upon to raise funds towards the debts incurred.

Types of Partners

  1. Nominal Partner:

This is a person whose name is used as if he or she was a member of the firm, but who in reality is not a partner. He or she is liable to the third parties who give credit to the firm on the strength of he or she being a partner in the business.

2. Partner in Profit Only:

This is a partner who only shares the profits but does not share the losses made. He or she does not take part in the management of the business but is liable to third parties who deal with the partnership.

3. Sub Partner:

This is a partner who gets the shares of profit from the firm through one of the partners. He or she is not liable against the firm and is not liable to the third parties for the firm’s debts.

4. Dormant Partner:

A dormant or sleeping partner is a partner who does not actively take part in the day-to-day partnership activities. Although he or she does not participate in the daily running of the business he or she has a right to the books of accounts and also sharing of profits and losses in the agreed ratios.

5. Minor Partner:

This partner can be admitted to the benefits of the existing partnership with the consent of all the partners. A minor partner is not personally liable for the debts of the firm but he or she shares in the partnership profits and benefits.

Characteristics of Partnerships

  1. Limited Life

The existence of a partnership is determined by years set in the partnership agreement.
In case such a detail is not added to the agreement then the death, bankruptcy, inability to carry out specific responsibilities or withdrawal leads to termination of the partnership.

2. Ease of Formation

Apart Even if it is easy to dissolve a partnership, the transfer of ownership whether to an existing or new partner requires approval of the partners. registration of the business, partnerships have few requirements.

3. Transfer of ownership

Even if it is easy to dissolve a partnership, the transfer of ownership whether to an existing or new partner requires approval of the partners.

4. Management and Operations

Among most partnerships, partners are involved in the day-to-day operations of the business.
This involvement in the operations makes critical decision-making easier as formal meetings are not required.

5. Number of Partners

When there are many partners within a business, day-to-day critical decision-making gets complicated.
Therefore decision-making in partnerships tends to work well with a small number of partners.

Dissolution of a Partne

  1. Losses

Considering profits are no longer being generated by the partnership, the partner may agree to dissolve the partnership.

2. Expansion

Growth of the business to an extent of requiring converting the partnership into a limited company for day-to-day operations to continue smoothly.

3. Tragedy

In case something tragic occurs to the business such as government intervention into the business for failing to follow regulations or death of a partner.

4. Irreconcilable Differences

Assuming the partners no longer agree on business operations within the firm then dissolving the partnership is the rational thing to do.

5. Retirement

Mutual agreement between the parties when one or more of the partners retire(s) or has he’s/her partnership(s) contract expires.

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