Sample Partnership Agreement

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Contents

Partnership Agreement

Parties, Date, and Recitals

This Partnership agreement (“Agreement”) is entered into and effective as of _ _[date]_ _, by _ _[names]_ _ (“Partners”).

The Partners desire to form a General Partnership under the laws of the State of California for the purposes and on the terms and conditions stated in this Agreement.

Basic Operative Clause

Formation. By this Agreement, the Partners form a General Partnership (“Partnership”) under the laws of the State of California, on the following terms and conditions.

Firm Name

Name. The name of the Partnership is _ _[name]_ _.

Chief Executive Office

Chief Executive Office. The Partnership’s chief executive office and place of business shall be located at _ _[street address]_ _, in _ _ _ _ _ _ County, California. The chief executive office may be changed from time to time, and other offices may be established by the Partners, in accordance with the terms and conditions of this Agreement.

Term of Patnership

Add one of the following alternatives
Alternative 1: Definite Term

Term. The Partnership shall begin on the date of this Agreement and shall continue until _ _[date]_ _, unless it is terminated earlier as provided in this Agreement. On the expiration of its term, the Partnership shall be dissolved and its affairs shall be wound up.

Alternative 2: Indefinite Term

The Partnership shall begin on the date of this Agreement and shall continue until dissolved and terminated by mutual agreement of Partners holding at least _ _[number]_ _ percent of the Partnership interests, or as otherwise provided for in this Agreement.

Alternative 3: Indefinite term subject to election to dissolve

The Partnership shall begin on the date of this Agreement and shall continue until one or more of the Partners shall, after _ _[date]_ _, give written notice to the Partnership and to the other Partners of an election to dissolve the Partnership. On the last day of the calendar month first occurring _ _[e.g., 60]_ _ days after such notice is given, the Partnership shall dissolve and its affairs shall be wound up, unless it is terminated earlier as provided in this Agreement.

Alternative 4: Year-to-Year continuation]

The Partnership shall begin on the date of this Agreement and shall continue for _ _[number]_ _ years. At the end of that period, the Partnership shall continue from year to year unless one or more of the Partners shall give the Partnership and the other Partners at least _ _[number]_ _ days written notice of an election to dissolve the Partnership as of the next anniversary of the Partnership’s date of beginning. If such notice is given, the Partnership shall dissolve on that anniversary and its affairs shall be wound up, unless it is terminated earlier as provided in this Agreement.

Purposes Clause

Add one of the following alternatives
Alternative 1: General purposes clause

Purposes. The purposes of the Partnership are to engage in the business of _ _[specify]_ _ and to do all things reasonably incidental to or in furtherance of that business.

Alternative 2: Specific purposes clause for acquisition and development of real property

Purposes. The purposes of the Partnership are to acquire that real property located in _ _[name of city]_ _, _ _[state]_ _, whose legal description is _ _[provide description]_ _; to construct, furnish and operate a multi-tenant commercial office building consisting of _ _[e.g., 10 floors]_ _ with related facilities; to borrow money and issue evidences of indebtedness in connection with that project; to secure the payment of that indebtedness; and to do all things incidental to or in furtherance of these enumerated purposes.

Powers

Partnership’s Powers. The Partnership is empowered to do any and all things necessary, appropriate, or convenient for the furtherance and accomplishment of its purposes and for the protection and benefit of the Partnership and its properties, including but not limited to the following:

(1) Entering into and performing contracts of any kind;
(2) Acquiring, constructing, operating, maintaining, owning, transferring, renting, or leasing any property, real, personal, or mixed;
(3) Borrowing money and issuing evidences of indebtedness, and securing any such indebtedness by mortgage, deed of trust, pledge, lien, or other security interest in or on any Partnership properties;
(4) Applying for and obtaining governmental authorizations and approvals;
(5) Bringing and defending actions at law or equity; and
(6) Subject to the express provisions of this Agreement, purchasing the interest of any Partner.

Statutory Filings

Filings. The Partners, or any one of them, on the Partnership’s behalf, shall sign and cause to be filed and published an appropriate fictitious business name statement under the California Fictitious Business Name Act within 40 days after the Partnership begins doing business, within 40 days after any subsequent change in its membership, and before the expiration of any previously filed statement. Each Partner appoints _ _[name]_ _ as his or her agent and attorney-in-fact to execute on his or her behalf any fictitious business name statement relating to this Partnership.

If applicable, add the following about the filing of a statement of partnership authority

Promptly after the date the Partnership begins and after the date of any subsequent change in its membership, the Partners shall sign, acknowledge, and verify a statement of Partnership authority as provided in Corporations Code §§16105 and 16303, and cause it to be recorded in each county in California in which the Partnership owns or contemplates owning real property or any interest in real property. That statement shall include a statement that any conveyance, encumbrance, or transfer of an interest in the Partnership’s real property must be signed on behalf of the Partnership by _ _[e.g., at least two of the Partners, who must include either John Doe or Jane Roe]_ _.

Capital

Contributions in Money or Property

Add one of the following alternatives’
Alternative 1: Cash; partners contribute equally

Initial Contributions. Each Partner shall initially contribute to the Partnership’s capital $_ _[amount]_ _ in cash. Each Partner’s contribution shall be paid in full within _ _[number]_ _ days after the date of this Agreement.

Alternative 2: Cash; partners contribute unequally

Initial Contributions. The Partnership’s initial capital shall consist of cash to be contributed by the Partners in the following amounts: _ _[Specify]_ _. Each Partner’s contribution shall be paid in full within _ _[number]_ _ days after the date of this Agreement.

Alternative 3: Property

Initial Contributions. The Partnership’s initial capital shall consist of the properties shown in Exhibit _ _[specify number or letter]_ _ to this Agreement, which exhibit sets forth the market values of the respective items of property and identifies the Partners who will contribute the respective items of property to the Partnership. The market values are the amounts of the initial capital contributions of the Partners contributing the respective properties. Each Partner’s contribution to the Partnership shall be conveyed within _ _[number]_ _ days after the date of this Agreement.

Alternative 4: Cash and property

Initial Contributions. The Partnership’s initial capital shall consist of cash and the properties shown in Exhibit _ _[specify number or letter]_ _ to this Agreement, which exhibit sets forth the capital contributions to be made by the respective Partners, the nature and quality of their respective contributions, and for contributions consisting of property, the market values of the respective items. Each Partner’s contribution to the Partnership shall be paid in full or conveyed within _ _[number]_ _ days after the date of this Agreement.

Contributions of Services

Contributions of Services. Partner _ _[name]_ _ has rendered services in the formation and organization of the Partnership and in making the arrangements necessary for the acquisition of its properties, the financing of those acquisitions, and the commencement of its business operations. _ _[He/She]_ _ shall contribute those services to the Partnership in consideration for the interest _ _[he/she]_ _ is to have in the Partnership as described in this Agreement.

Contributed Property; Special Tax Allocations Because of Carryover Basis

Special Tax Allocations. For certain items of property to be contributed to the Partnership’s capital, Exhibit _ _[specify number or letter]_ _ to this Agreement shows the basis of those items for federal income tax purposes in the hands of the respective Partners who are to contribute them and the amounts that the Partners agree are the market values of the respective items. Notwithstanding any other provisions of this Agreement, income, gain, loss, and deductions with respect to the contributed property shall be allocated among the Partners to reflect the difference between the basis of the property contributed for tax purposes and its fair market value, in accordance with Internal Revenue Code §704(c) and the regulations under it.

Failure to Make Initial Contribution

Add one of the following alternatives
Alternative 1: Partnership dissolves

Failure to Contribute. If any Partner fails to pay or convey his or her initial contribution to the Partnership’s capital at the time and in the form and amount required by this Agreement, the Partnership shall immediately dissolve and each Partner who has paid or conveyed all or any portion of his or her initial contribution to the Partnership’s capital shall be entitled to a return of the funds and properties that he or she contributed. If the Partners shall have entered into a written agreement requiring an alternative procedure for continuing the Partnership, however, that alternative procedure shall be followed.

Alternative 2: Partnership continues without additional contributions

Failure to Contribute. If any Partner fails to pay or convey his or her initial contribution to the Partnership’s capital at the time and in the form and amount required by this Agreement _ _[and the amounts in default are _ _[number]_ _ percent or less of all initial capital contributions required by this Agreement]_ _, the Partnership shall not dissolve or terminate, but it shall continue as a Partnership of only the Partners who have made their initial capital contributions as required. The share in the Partnership’s profits and losses allocated under this Agreement to any Partner who has failed to make his or her initial contribution shall be reallocated to the remaining Partners in proportion to their respective shares of Partnership profits and losses as specified in this Agreement.

If the failure to pay initial capital contributions required under this Agreement relates to more than the above-specified percentage of all required initial capital contributions, the Partnership shall immediately dissolve. Each Partner who has paid all or any portion of his or her initial or any additional capital contribution shall then be entitled to a return of the funds and properties he or she contributed.

Alternative 3: Additional contributions required for continuation

Failure to Contribute; Additional Contributions. If any Partner fails to pay his or her initial contribution to the Partnership’s capital at the time and in the form and amount required by this Agreement _ _[and the amounts in default are _ _[number]_ _ percent or less of all initial capital contributions required under this Agreement]_ _, the Partnership shall not dissolve or terminate, but it shall continue as a Partnership of only the Partners who have made their initial capital contributions, but only if those Partners pay the initial capital contribution that was to have been made by each noncontributing Partner, as follows:

(1) The Partnership shall promptly give written notice of the failure to all Partners who have not failed to make their initial capital contributions, specifying the amount not paid.
(2) Within _ _[number]_ _ days after the notice is given, the remaining Partners shall pay the amount of the defaulted contribution in proportion to the respective amounts that they are required to contribute to the Partnership’s capital under this Agreement.
(3) Each noncontributing Partner’s share in the Partnership’s profits and losses shall be reallocated to the remaining Partners in proportion to their respective shares of Partnership profits and losses under this Agreement.

If the failure to pay initial capital contributions required under this Agreement relates to more than the above-specified percentage of all required initial capital contributions, the Partnership shall immediately dissolve. Each Partner who has paid all or any portion of his or her initial or any additional capital contribution shall then be entitled to a return of the funds and properties he or she contributed.

Alternative 4: Partners or outsiders may purchase defaulted share

Failure to Contribute; Purchase of Defaulted Shares. If any Partner fails to pay any contribution to the Partnership’s capital at the time and in the form and amount required by this Agreement _ _[and the amounts in default are _ _[number]_ _ percent or less of all initial capital contributions required under this Agreement]_ _, the Partnership shall not dissolve or terminate, but it shall continue as a Partnership of only the Partners who have made their capital contributions and any purchaser of the interest of any Partner who shall have failed to do so, but only if the defaulting Partner’s interest in the Partnership is acquired as follows:

(1) The Partnership shall promptly give written notice of the failure to make payment, specifying the amount not paid, to all Partners who have not failed to make their required capital contributions. Any or all of the remaining Partners shall be entitled to elect to acquire the Partnership interest of the Partner who has failed to make the required contribution by giving written notice of election to the Partnership within _ _[number]_ _ days after the Partnership gives notice of the default.
(2) Within _ _[number]_ _ days after the Partnership gives notice of default, the electing Partners shall pay to the Partnership the amount of the defaulted contribution and shall pay to the defaulting Partner any credit balance then in his or her capital account.
(3) If only one Partner elects to acquire the interest, that Partner shall make the entire payment and acquire the entire interest. If more than one Partner elects to acquire the interest, each shall share in the payments and in the interest acquired in the same proportion that the amount required to be paid to the Partnership’s capital by that Partner under this Agreement bears to the aggregate amounts required to be paid to the Partnership’s capital by all participating Partners under this Agreement.
(4) If no Partner elects to acquire the interest of a defaulting Partner, that interest may be offered to other parties, subject to the approval of a majority in capital interest of the Partners who have not defaulted, at a price equal to the sum of (a) the unpaid contribution of the defaulting Partner, which shall be payable to the Partnership, plus (b) any credit balance then in the defaulting Partner’s capital account, which shall be payable to the defaulting Partner.
(5) On a purchase of a defaulting Partner’s interest, the purchaser’s capital account shall be credited with the amount of the defaulting Partner’s unpaid contribution paid to the Partnership by that purchaser plus any credit balance in the defaulting Partner’s capital account that has not been paid to the defaulting Partner.

Deferred Contributions

Deferred Contributions. _ _[Name]_ _ shall be a Partner, but shall not make any contribution in cash or property to the Partnership’s initial capital, and no amount shall be credited initially to _ _[his/her]_ _ capital account. _ _[He/She]_ _ shall subsequently contribute to the Partnership capital, and _ _[his/her]_ _ capital account shall be credited, as follows:

Add one of the following alternatives
Alternative 1: Monthly installments

_ _[Name]_ _ shall contribute $_ _[amount]_ _ to the Partnership capital on or before the first day of each month, beginning on _ _[date]_ _ and continuing until _ _[he/she]_ _ shall have contributed the aggregate sum of $_ _[amount]_ _.

Alternative 2: Contributions from profits

_ _[Name]_ _ shall contribute to the Partnership the lesser of $_ _[amount]_ _ or _ _[number]_ _ percent of _ _[his/her]_ _ distributive share of the Partnership’s profits for each fiscal year, beginning with the year ending _ _[date]_ _ and continuing until _ _[he/she]_ _ shall have contributed the aggregate sum of $_ _[amount]_ _. These contributions shall be made on or before the date on which the respective year’s distributive shares of profits are distributed in full and may be made by not withdrawing the specified portion or amount of Partnership profits.

Additional Capital

Additional Capital. Each Partner shall annually contribute to the Partnership’s capital, for a period of _ _[number]_ _ years, the lesser of $_ _[amount]_ _ or _ _[number]_ _ percent of that Partner’s share of each year’s profits by not withdrawing the specified portion or amount of Partnership profits.

Whenever it is determined by the written agreement of Partners holding _ _[e.g., a majority]_ _ in capital interest of the Partnership that its capital is or is presently likely to become insufficient for the conduct of its business, those Partners may, by written notice to all Partners, call for additional contributions to capital. These contributions shall be payable in cash no later than the date specified in the notice and no sooner than _ _[number]_ _ days after the notice is given. Each Partner shall be liable to the Partnership for that Partner’s share of the aggregate contributions duly called for under this section. Each Partner’s share shall be in proportion to his or her share of the Partnership’s profits, but no Partner shall be required to contribute more than $_ _[amount]_ _.

No Partner may make any voluntary contribution of capital to the Partnership without the consent of all the Partners.

Withdrawals of Capital

No Withdrawal of Capital. No Partner may withdraw capital from the Partnership without the consent of all the Partners.

No Interest on Capital Contributions

No Interest on Contributions. No Partner shall be entitled to receive any interest on his or her capital contribution, except that, if a Partner is entitled to repayment of his or her contribution, the Partner shall be entitled to interest on the contribution not repaid at the rate of _ _[number]_ _ percent per annum from the date when repayment should have been made.

Loans to Partnership

Loans to Partnership. No Partner shall lend or advance money to or for the Partnership’s benefit without the approval of _ _[all/a majority in capital interest of the]_ _ Partners. If any Partner, with the requisite consent of the other Partners, lends any money to the Partnership in addition to his or her contribution to its capital, the loan shall be a debt of the Partnership to that Partner and shall bear interest at the rate of _ _[number]_ _ percent per annum. This liability shall not be regarded as an increase in the lending Partner’s capital and shall not entitle the lending Partner to any increased share of the Partnership’s profits.

Any loan by a Partner to the Partnership shall be evidenced by a promissory note delivered to the lending Partner and executed in the name of the Partnership by the managing Partner.

Division of Profits and Losses

Alternative 1: Division based on initial capital contribution of profit and losses

Division of Profits and Losses. The Partnership’s profits and losses shall be allocated among the Partners in the same proportions that their initial capital accounts bear to each other. No additional share of profits or losses shall inure to any Partner because of fluctuations in the Partners’ capital accounts.

Alternative 2: Division based on average capital account balance

Division of Profits and Losses. The Partnership’s profits and losses shall be allocated among the Partners in the same proportions that their average capital account balances during the fiscal year bear to each other. No Partner shall make contributions or withdrawals from his or her capital account without unanimous written approval of all Partners.

Distribution of Profits

Add one of the following alternatives
Alternative 1: Distributions in proportion to initial capital contributions

Distribution of Profits. The Partnership may distribute to the Partners any cash in excess of amounts reasonably necessary to the conduct of the business of the Partnership. Except as provided in section _ _[specify number or letter]_ _, distributions shall be made to the Partners in proportion to their initial capital contributions.

Alternative 2: Distributions based on profit

Distribution of Profits. Within _ _[number]_ _ days after the end of each fiscal year of the Partnership, the Partnership shall distribute in cash to the Partners, in proportion to their respective shares in the Partnership’s profits, an amount equal to the Partnership’s profit for that fiscal year as computed under this Agreement.

Alternative 3: Distributions based on cash flow

Distribution of Profits. Within _ _[number]_ _ days after the end of each fiscal year of the Partnership, the Partnership shall distribute in cash to the Partners, in proportion to their respective shares in the Partnership’s profits, an amount equal to:

(1) The Partnership’s profit for that fiscal year as computed under this Agreement,
(2) Increased by the amounts deducted for that fiscal year as depreciation or cost recovery, depletion, or amortization on the Partnership’s federal income tax return,
(3) Increased by the amount of any payments received, and reduced by the amount of any payments made, by the Partnership during that fiscal year on account of the principal of all debt obligations, other than obligations for which provision was made in computing profit,
(4) Reduced by a reserve reasonably retained for the operating and capital requirements of the Partnership’s business.

Distributions of Proceeds From Sale of Capital Assets

Distributions From Sale of Capital Assets. If _ _[description or other identification of asset]_ _ is sold, simultaneously with the distribution of the Partnership’s profits for each fiscal year during which the Partnership is paid all or any part of the proceeds of that sale, the Partnership shall also distribute in cash to the Partners an amount equal to the cash proceeds realized by the Partnership during that year on the sale, including payments on account of the principal of any purchase money obligation received by the Partnership in the sale but excluding interest on that obligation. Such proceeds shall be allocated for distribution to the Partners in a manner that will result in the distribution to the Partners of the Partnership’s gain or loss from the sale being proportionate to their respective shares in the gain or loss from the sale reportable by them for federal income tax purposes, except as otherwise expressly provided in this Agreement. Each Partner’s share of the distributions of proceeds from any sale of capital assets shall be charged to his or her capital account.

Limit on Distributions

Add one of the following alternatives
Alternative 1: General limitation

Limit on Distributions. Notwithstanding anything in this Agreement to the contrary, the aggregate amounts distributed to the Partners from the Partnership’s profits shall not exceed the amount of cash available for distribution, taking into account the Partnership’s reasonable working capital needs as determined by a majority in capital interest of the Partners.

Alternative 2: Specific limitation

Limit on Distributions. Notwithstanding anything in this Agreement to the contrary, the aggregate amounts distributed to the Partners from the Partnership’s profits during any fiscal year of the Partnership shall not exceed $_ _[amount/_ _[number]_ _ percent of the aggregate positive balances of all capital accounts]_ _ as of the close of the Partnership’s immediately preceding fiscal year.

Accounting

Fiscal Year of Partnership

Add one of the following alternatives
Alternative 1: Fiscal year is calendar year

Fiscal Year. The fiscal year of the Partnership shall be the calendar year.

Alternative 2: Fiscal year is noncalendar year

Fiscal Year. The fiscal year of the Partnership shall end on _ _[month and day]_ _ of each year.

Accounting Method

Accounting Method. The Partnership books shall be kept on the _ _[e.g., accrual/cash]_ _ basis.

Capital Accounts – Initial Contributions

Maintenance of Capital Accounts. An individual capital account shall be maintained for each Partner and the Partner’s initial capital contribution in cash or property shall be credited to that account. Capital accounts shall be maintained in accordance with Treas Reg §1.704-1(b)(2)(iv). No additional share of profits or losses shall inure to any Partner because of changes or fluctuations in the Partner’s capital account.

Adjustment of Capital Accounts

Adjustment of Capital Accounts. The capital account for each Partner shall be credited with or increased by the following:

(1) Any additional capital contributions made by the Partner from time to time as authorized by this Agreement;
(2) The Partner’s share under this Agreement of the Partnership’s profits; and
(3) On the Partnership’s dissolution and in its winding up, the credits authorized by the provisions of this Agreement that relate to adjustments of capital accounts in connection with liquidation.

The capital account for each Partner shall be debited with or reduced by the following:

(1) Distributions to the Partner of cash or property, which property shall be valued for this purpose at its fair market value;
(2) The Partner’s share under this Agreement of the Partnership’s losses and of any items then required under applicable tax laws, rules, and regulations to be debited to capital accounts of Partners, to the extent and in the manner so required; and
(3) On the Partnership’s dissolution and in its winding up, the debits authorized by the provisions of this Agreement that relate to adjustments of capital accounts in connection with liquidation.

In connection with the actual liquidation of the Partnership’s properties on its dissolution and winding up, the capital account for each Partner shall be adjusted to reflect the following:

(1) The results of operations for the fiscal period then ended;
(2) The results of transactions in connection with the liquidation;
(3) Unrealized gain or loss on Partnership property that is to be or has been transferred to creditors on account of their claims or distributed to Partners on account of their interests in the Partnership. The amount of such unrealized gain or loss shall be computed by comparing the fair market value of any such property to its adjusted basis for federal income tax purposes. The unrealized gain or loss shall be allocated to the Partners’ capital accounts in the same manner as the gain or loss from the actual sale of such property would have been allocated; and
(4) The distribution of cash or property to Partners made on the liquidation.

If there is a deficit in any Partner’s capital account after the capital accounts have been adjusted in connection with the liquidation of the Partnership properties, that Partner (and not any predecessor) shall contribute the amount of such deficit to the Partnership before the end of the taxable year of the liquidation or by such earlier date as may be required to complete the liquidation in accordance with a duly adopted plan of liquidation. Amounts thus contributed shall be distributed to or among the creditors and Partners in accordance with the then-applicable provisions for distribution of Partnership property on dissolution, winding up, and liquidation.

Determination of Profit and Loss

Determination of Profit and Loss. The Partnership’s net profit or net loss for each fiscal year shall be determined as soon as practicable after the close of that fiscal year in accordance with the accounting principles employed in the preparation of the federal income tax return filed by the Partnership for that year, but without any special provisions for tax-exempt or partially tax-exempt income. If the Partnership assets include assets subject to Internal Revenue Code §704(c), the adjustments required under Internal Revenue Code §704(c) in the determination of any item of income, gain, loss, deduction, or credit shall not be taken into account in determining the same for book purposes.

Profit and Loss Defined. “Profit” and “loss” for all purposes of this Agreement shall be determined in accordance with the accounting method followed by the Partnership for federal income tax purposes and otherwise in accordance with generally accepted accounting principles and procedures applied in a consistent manner. The calculation of profit and loss shall take into account Partnership income exempt from federal income tax and Partnership expenses and costs not deductible or properly chargeable to capital for federal income tax purposes. Every item of income, gain, loss, deduction, credit, or tax preference entering into the computation of profit or loss shall be considered as allocated to each Partner in the same proportion as profit is allocated to that Partner for any year in which the Partnership operates at a profit, and in the same proportion as loss is allocated to that Partner for any year in which the Partnership operates at a loss. Any increase or reduction in the amount of any item of income, gain, loss, or deduction attributable to an adjustment to the basis of Partnership property made under a valid election under Internal Revenue Code §754 and under the corresponding provisions of applicable state and local income tax laws shall be charged or credited, as the case may be, and any increase or reduction in the amount of any item of credit or tax preference attributable to any such adjustment shall be allocated to the capital accounts of those Partners entitled to them under such code or laws.

Records and Reports

Partnership Books

Partnership Books. The Partnership shall keep proper and complete books of account of its business at its chief executive office. The Partnership shall provide its Partners and their agents and attorneys access to the books and records, and provide to former Partners and their agents and attorneys access to books and records pertaining to the period during which they were Partners. This right of access includes the opportunity to inspect and copy books and records during ordinary business hours. The Partnership may impose reasonable charges covering the cost of labor and material for copies of documents furnished. The accounting records shall be maintained in accordance with generally accepted bookkeeping practices for this type of business.

Annual Report to Partners

Annual Report to Partners. Within _ _[number]_ _ days after the end of each fiscal year, the Partnership shall furnish to each Partner an annual report consisting of at least:

(1) A copy of the Partnership’s federal and state income tax returns for that fiscal year;
(2) A supporting statement of income or loss;
(3) A balance sheet showing the Partnership’s financial position as of the end of that fiscal year; and
(4) Any additional information that the Partners may require for the preparation of their individual federal and state income tax returns.

Management

Control of Business

Add one of the following alternatives
Alternative 1: Vote based on partners’ interest

Control of Business. Each Partner shall participate in the control, management, and direction of the Partnership’s business. In exercising this control, management, and direction, each Partner’s vote shall be in proportion to the Partner’s interest in the Partnership’s profits and losses.

Alternative 2: All partners have equal votes

Control of Business. Each Partner shall participate in the control, management, and direction of the Partnership’s business. In exercising this control, management, and direction, each Partner shall have the same vote as each other Partner.

Alternative 3: Control by managing partner

Control of Business. The managing partner shall be _ _[name]_ _. _ _[He/She]_ _ shall have control over the business of the Partnership and assume direction of its business operation until replaced by a vote of _ _[number]_ _ percent of the Partnership interests. The managing partner shall consult and confer as far as practicable with the nonmanaging Partners, but the power of decision shall be vested in the managing partner. The managing partner’s duties shall include control over the Partnership’s books and records and hiring any independent certified public accountants _ _[he/she]_ _ considers necessary for this purpose and for the preparation of such reports as may be necessary or required to advise the other Partners of the Partnership’s operations. Except as otherwise expressly provided in this Agreement, all things to be done by the Partnership shall be done under the managing partner’s control and supervision. The managing partner shall devote such time to the business of the Partnership as it _ _[he/she]_ _ determines is necessary in _ _[his/her]_ _ sole discretion. The managing partner shall be entitled to retain such consultants and agents as are reasonably necessary to provide services for operation of the Partnership, provided they remain under the ultimate control of the managing partner, and provided further that the managing partner does not delegate to such consultants or agents responsibilities charged to the managing partner. The managing partner shall be entitled to reimbursement monthly, on the submission of an itemized account, of any sums _ _[he/she]_ _ shall have expended for the benefit of the Partnership’s business. On the managing partner’s death, removal, resignation, or other disability, a successor managing partner shall be selected by a majority in capital interest of the Partners.

Acts Requiring Majority Consent

Acts Requiring Majority Consent. The following acts may be done only with the consent of a majority in _ _[number/capital interest/profit interest]_ _ of the Partners:

(1) Borrowing money in the Partnership’s name, other than in the ordinary course of the Partnership’s business or to finance any part of the purchase price of the Partnership’s properties;
(2) Transferring, hypothecating, compromising, or releasing any Partnership claim except on payment in full;
(3) Selling, leasing, or hypothecating any Partnership property or entering into any contract for any such purpose, other than in the ordinary course of the Partnership’s business and other than any hypothecation of Partnership property to secure a debt resulting from any transaction permitted under (1); or
(4) Knowingly suffering or causing anything to be done whereby Partnership property may be seized or attached or taken in execution, or its ownership or possession otherwise endangered.

Handling Funds

Add one of the following alternatives
Alternative 1: Funds handled by all partners

Handling Funds. All Partnership funds shall be deposited in the Partnership’s name and shall be subject to withdrawal only on the signatures of at least _ _[number]_ _ Partners.

Alternative 2: Managing partner handles funds

Handling Funds. All Partnership funds shall be deposited in the Partnership’s name and shall be subject to withdrawal only on the signature of the managing partner.

Remuneration to Partner

Add one of the following alternatives
Alternative 1: Partners entitled to remuneration

Partners’ Remuneration. Each Partner shall be entitled to

(1) Monthly remuneration as follows: _ _[list names and amounts]_ _; or
(2) Other amounts as may from time to time be determined by the written consent or agreement of all the Partners.

Remuneration shall be treated as a Partnership expense in determining the Partnership’s profits or losses.

Alternative 2: No remuneration

Partners not Entitled to Remuneration. No Partner shall be entitled to remuneration for acting in the Partnership business.

Alternative 3: Remuneration to managing partner

Remuneration of Managing Partner. The managing Partner shall be entitled to monthly remuneration of $_ _[amount]_ _ or such other amount as may from time to time be determined by the unanimous written consent or agreement of the Partners. That remuneration shall be treated as a Partnership expense in determining the Partnership’s profits or losses.

Effect of Assignment of Interest

Assignment of Interest. Any assignment or hypothecation of a Partner’s interest in the Partnership shall terminate that Partner’s right to receive remuneration from the Partnership.

Partner’s Fiduciary Duty

Duty of Loyalty

Duty of Loyalty. Each Partner owes a duty of loyalty to the Partnership and the other Partners, which includes the following:

(1) To account to the Partnership and hold as trustee for it any property, profit, or benefit derived by the Partner in the conduct and winding up of the Partnership business or derived from a use by the Partner of Partnership property or information, including the appropriation of a Partnership opportunity.
(2) To refrain from competing with the Partnership in the conduct or winding up of the Partnership business as or on behalf of a party having an interest adverse to the Partnership.
(3) To refrain from competing with the Partnership in the conduct of the Partnership business before the dissolution of the Partnership.
Add one of the following alternatives
Alternative 1: Noncompeting outside activities permitted

Any Partner may engage in one or more businesses, other than the business of the Partnership, but only to the extent that this activity does not compete or materially interfere with the Partnership’s business and does not conflict with that Partner’s obligations under this Agreement. Neither the Partnership nor any other Partner shall have any right to any income or profit derived by a Partner from any business activity permitted under this section.

Alternative 2: Outside activities restricted

While _ _[name]_ _ is required to participate in the control, management, and direction of the Partnership business, _ _[he/ she]_ _ shall devote _ _[his/her]_ _ full time and attention to the conduct of that business and shall not be actively engaged in the conduct of any other business for compensation or a share in profits as an employee, officer, agent, proprietor, partner, or stockholder. This prohibition shall not prevent _ _[him/her]_ _ from being a passive investor in any enterprise, however, if _ _[he/she]_ _ is not actively engaged in its business and does not exercise control over it. Neither the Partnership nor any other Partner shall have any right to any income or profit derived from any such passive investment.

Alternative 3: Specific enumeration of permitted outside activities

A Partner shall be permitted to engage in the following conduct without being in violation of this Agreement: _ _[Specify type of conduct to be permitted]_ _.

Any act of a Partner that otherwise would violate the fiduciary duties owed by a Partner to the Partnership may be approved by the written consent of _ _[e.g., 51 percent]_ _ of the remaining Partners who do not participate in such act on full disclosure of all material facts by the Partner whose conduct otherwise is deemed to breach such fiduciary duties.

Duty of Care

Duty of Care. During the conduct of any Partnership business or when the Partnership is being wound up, no Partner shall be liable to the Partnership or any other Partner for losses sustained or liabilities incurred, unless it is determined that such conduct is grossly negligent or reckless, or intentional misconduct, or a knowing violation of law.

Duty of Good Faith and Fair Dealing

Duty of Good Faith and Fair Dealing. Each Partner shall discharge its duties to the Partnership and the other Partners and exercise any rights consistently with the obligation of good faith and fair dealing.

Furtherance of Partner’s Own Interests

Furtherance of Partner’s Interests. A Partner does not violate a duty or obligation under this Agreement or controlling law merely because the Partner’s conduct furthers the Partner’s own interest.

Changes in Membership and Partner Dissociation

New Partners

Admission of New Partners. A new Partner may be admitted to the Partnership _ _[as of the beginning of any fiscal year of the Partnership]_ _, but only with the written approval of _ _[all/a majority in capital interest of the]_ _ Partners. Each new Partner shall be admitted only if the new Partner shall have executed this Agreement or an appropriate supplement to it in which the new Partner agrees to be bound by the terms and provisions of this Agreement as they may be modified by that supplement. Admission of a new Partner shall not cause dissolution of the Partnership. Any new Partner so admitted to the Partnership shall contribute capital to the Partnership as agreed by all Partners.

Spousal Consent. Within 20 days after any individual becomes a Partner, or a Partner marries, the Partner shall have the Partner’s spouse execute a consent substantially in the form attached as Exhibit _ _[specify number or letter]_ _, unless the Partner’s spouse is already a Partner.

Partner’s Dissociation

Dissociation. A Partner is dissociated from the Partnership on the occurrence of any of the following events:

(1) Delivery of written notice by the Partner setting forth the Partner’s intention to withdraw as a Partner on the date set forth in the notice but in no event earlier than _ _[e.g., 30 days]_ _ after receipt by the Partnership.
(2) As otherwise provided in this Agreement.
(3) The Partner’s expulsion as provided in this Agreement.
(4) The Partner (a) becomes a debtor in bankruptcy; (b) executes an assignment for the benefit of creditors; (c) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidation of that Partner or of all or substantially all of that Partner’s property; or (d) fails to have vacated or stayed the appointment of a trustee, receiver, or liquidator of the Partner or of all or substantially all of the Partner’s property obtained without the Partner’s consent or acquiescence, within 90 days after the appointment or within 90 days after the expiration of a stay.
(5) For any individual Partner, on: (a) the Partner’s death; (b) the appointment of a guardian or general conservator for the Partner; or (c) a judicial determination that the Partner has otherwise become incapable of performing the Partner’s duties under the Partnership agreement.

Partner’s Expulsion by Partner Vote

Add one of the following alternatives
Alternative 1: Expulsion by partner votes in accordance with RUPA

Expulsion under RUPA. A Partner may be expelled from the Partnership by the vote of the other Partners holding at least _ _[number]_ _ percent in capital interest of the Partnership (excluding the interest of the Partner to be expelled) if, by that vote, it is determined in the sole discretion of those Partners that:

(1) It is unlawful to carry on the Partnership business with that Partner;
(2) There has been a transfer of all or substantially all of that Partner’s transferable interest in the Partnership, except a transfer for security purposes or issuance of a court’s charging order, neither of which have been foreclosed on;
(3) Within 90 days after the Partnership notifies a corporate Partner that it will be expelled because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, there is no revocation of such certificate of dissolution or no reinstatement of its charter or its right to conduct business; or
(4) A partnership, limited partnership, or limited liability company Partner has been dissolved and its business is being wound up.
Alternative 2: Expulsion by partnership agreement

Expulsion under Partnership Agreement. A Partner may be expelled from the Partnership by the vote of the other Partners holding at least _ _[number]_ _ percent in capital interest of the Partnership (excluding the interest of the Partner to be expelled) if, by that vote, it is determined in the sole discretion of those Partners that the Partner to be expelled has materially breached or is unable to perform that Partner’s material obligations under this Agreement or that the continued association of that Partner with the Partnership is detrimental to the best interests of the Partnership’s business.

Expulsion shall become effective when written notice of expulsion is served on the expelled Partner. When the expulsion becomes effective, the expelled Partner’s rights, powers, and authority as a Partner of the Partnership, including its rights to participate in the Partnership’s profits and to draw any salary, shall terminate.

Expulsion by Judicial Determination

Expulsion by Judicial Determination. On application by the Partnership or another Partner, a Partner may be expelled from the Partnership by judicial determination because of any of the following:

(1) The Partner engaged in wrongful conduct that adversely and materially affected the Partnership business.
(2) The Partner willfully or persistently committed a material breach of the Partnership agreement or of a duty owed to the Partnership or the other Partners.
(3) The Partner engaged in conduct relating to the Partnership business that makes it not reasonably practicable to carry on the business in Partnership with the Partner.

Retirement from Partnership Management

Retirement From Partnership Management. At the end of the Partnership’s fiscal year, any Partner who has reached his or her _ _[e.g., 70th]_ _ birthday during that fiscal year shall retire from active participation in the control, management, and direction of the Partnership’s business. Subject to the provisions of this Agreement regarding dissociation and dissolution, such a retirement shall not affect the retiring Partner’s interest in the Partnership, its properties, or its profits and losses.

Retirement From Partnership

Add one of the following alternatives
Alternative 1: Voluntary retirement from partnership

Retirement From Partnership. After his or her _ _[e.g., 70th]_ _ birthday, any Partner may voluntarily retire from the Partnership after giving at least _ _[number]_ _ days’ prior notice to the Partnership. On such retirement, the Partner shall be deemed dissociated from the Partnership.

Alternative 2: Mandatory retirement from partnership

Retirement From Partnership. After his or her _ _[e.g., 70th]_ _ birthday, any Partner may be compelled to retire from the Partnership by a vote of a majority in _ _[number/capital interest]_ _ of the other Partners. On such retirement, the Partner shall be deemed dissociated from the Partnership.

Noncompetition Covenant

Add one of the following alternatives
Alternative 1: Noncompetition covenenat with a time limit

Noncompetition Covenant. Following dissociation of a Partner or the dissolution of the Partnership, the dissociated Partner or the Partner causing the dissolution shall not carry on a business similar to the business of the Partnership within the _ _[cities/counties]_ _ of _ _[names]_ _ for a period of _ _[number]_ _ years as long as any other member of the Partnership, or any person deriving title to the business or its goodwill from any other member of the Partnership, carries on a like business there.

Alternative 2: Noncompetition covenant without time limit

Noncompetition Covenant. Following dissociation of a Partner or the dissolution of the Partnership, the dissociated Partner or the Partner causing the dissolution shall not carry on a business similar to the business of the Partnership within the _ _[cities/counties]_ _ of _ _[names]_ _ as long as any other member of the Partnership, or any person deriving title to the business or its goodwill from any other member of the Partnership, carries on a like business there.

Payment When Business Not Wound Up

Purchase of Dissociated Partner’s Interest. Except as otherwise provided in this Agreement, if a Partner is dissociated from the Partnership and the remaining Partners do not elect to dissolve the Partnership, the Partnership shall cause the dissociated Partner’s interest in the Partnership to be purchased on the following terms:

(1) The buyout price of a dissociated Partner’s interest is the amount that would have been paid on settlement of a Partner’s account under California Corporations Code §16807(b) had the business of the Partnership been wound up if, on the date of dissociation, the assets of the Partnership were sold at a price equal to the greater of the liquidation value or the value based on a sale of the entire business as a going concern without the dissociated Partner and the Partnership was wound up as of that date. Interest shall be paid from the date the amount owed becomes due to the date of payment.
(2) Damages for wrongful dissociation under Corporations Code §16602(b) and all other amounts owing from the dissociated Partner to the Partnership, whether or not presently due, shall be offset against the buyout price. Interest shall be paid from the date the amount owed becomes due to the date of payment.
(3) The Partnership shall indemnify, defend, and hold the dissociated Partner harmless from any Partnership liabilities, whether incurred before or after the event of dissociation, except liabilities incurred by an act of the dissociated Partner after dissociation (a) when the other party reasonably believed that the dissociated Partner was then a Partner, (b) the other party did not have notice of the Partner’s dissociation, or (c) the other party is not deemed to have knowledge of the Partner’s dissociation due to filing of a statement of Partnership authority or statement of dissociation.
(4) (a) If no agreement is reached for the purchase of the dissociated Partner’s interest within 120 days after the dissociated partner’s written demand for payment, the Partnership shall pay, or cause to be paid, in cash to the dissociated Partner the amount the Partnership estimates to be the buyout price and accrued interest, reduced by any offsets and accrued interest under this section.
(b) Payment shall be accompanied by all of the following:
(i) A statement of Partnership assets and liabilities as of the date of dissociation.
(ii) The latest available Partnership balance sheet and income statement, if any.
(iii) An explanation of how the estimated amount of the payment was calculated.
(iv) A written notice that the payment is in full satisfaction of the obligation to purchase unless, within 120 days after the written notice, the dissociated partner commences an action to determine the buyout price or to determine any offset, or to decide other terms of the obligations to purchase.
(5) Should any dissociation occur within 90 days before the dissolution of a Partnership, then:
(a) All Partners who dissociate within 90 days before the dissolution shall be treated as Partners for purposes of ending up the Partnership’s business on a dissolution of the Partnership; and
(b) Any damage for wrongful dissociation and all other amounts owed by the dissociated Partner to the Partnership, whether or not presently due, shall be taken into account in determining the amount distributable to the dissociated Partner on such dissolution and winding up.

Payment of Purchase Price by Mutual Agreement When Business Not Wound Up

Purchase of Dissociated Partner’s Interest. Except as otherwise provided in this Agreement, if a Partner is dissociated from a Partnership and the remaining Partners do not elect to dissolve the Partnership, the Partnership shall cause the dissociated Partner’s interest in the Partnership to be purchased for the purchase price determined in accordance this Agreement.

Transfer of Partnership Interests

Definition of Transferable Interest

Transferable Interest Defined. The only transferable interest of a Partner in the Partnership is the Partner’s share of the profits and losses of the Partnership and the Partner’s right to receive distributions.

Transferability of Interest

Add one of the following alternatives’
Alternative 1: Transferability of interest without substitution

Transferability Without Substitution. (1) A transfer in whole or in part of a Partner’s transferable interest in the Partnership shall be permissible but such a transfer does not:

(a) Cause the Partner’s dissociation or dissolution and winding up of the Partnership business;
(b) As against the remaining Partners, entitle the transferee, during the continuance of the Partnership, to participate in the management or conduct of the Partnership business, to require access to information concerning the Partnership transactions, or to inspect or copy Partnership books or records.
(2) Any such transferee has a right only to the following:
(a) To receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled;
(b) To receive on the dissolution and winding up of the Partnership business, in accordance with the transfer, the net amount otherwise distributable to the transferor;
(c) To seek a judicial determination that it is equitable to wind up the Partnership business.
(3) In a dissolution and winding up, a transferee is entitled to an account of Partnership transactions only from the date of the latest account agreed to by all of the Partners.
(4) On transfer, the transferor retains the rights and duties of a Partner other than the interest in distributions transferred.
(5) The Partnership shall not give effect to a transferee’s rights under this section until the Partnership has notice of the transfer.
Alternative 2: Nontransferability

Nontransferability of Interest. A Partner’s interest in the Partnership shall not be transferred, in whole or in part, except by intestate succession, testamentary disposition, or through a decree or judgment from a court of competent jurisdiction. Any other purported transfer of all or part of a Partner’s interest shall be void and of no effect against the Partnership, any other Partner, any creditor of the Partnership, or any claimant against the Partnership. No such transfer shall constitute the transferee a Partner or entitle the transferee to any of the rights of a Partner, other than the right to receive as much of the transferor’s share of Partnership distributions as is transferred to the transferee.

Alternaitve 3: Limited transferability

Limited Transferability. A Partner may transfer all or part of his or her interest in the Partnership only as follows:

(1) To the Partnership or to any other Partner;
(2) By intestate succession or testamentary disposition on the Partner’s death;
(3) By a gift to the Partner’s spouse or children, or to a trustee for the Partner’s spouse or children or both;
(4) To a corporation if, immediately after the transfer, the Partner making the transfer owns at least 50 percent of that corporation’s voting shares; or
(5) To any person after the Partner making the transfer has first offered the other Partners their rights of first refusal in accordance with the terms and conditions of this Agreement.

No such transfer shall constitute the transferee a Partner or entitle the transferee to any of the rights of a Partner, other than the right to receive as much of the transferor’s share of Partnership distributions as is transferred to the transferee. Until the transferee is admitted to the Partnership in substitution for the transferor under the provisions of this Agreement for admitting new Partners, such a transfer shall not terminate any of the transferor’s obligations.

Transfers Under Dissolution of Marriage

Transfers Under Dissolution of Marriage. In this section, “Partner” refers to the party named in the beginning of this Partnership agreement as a Partner and “Spouse” refers to the spouse of that Partner. In the event of a dissolution of marriage of any married Partner decreed by a court of competent jurisdiction, the interest of the Partner in the Partnership shall be allocated and distributed between the Partner and Spouse as the court may decree; provided, however, that:

(1) No spouse shall become a partner of the Partnership by virtue of any allocation or distribution of the interest of such Partner in any such dissolution proceeding;
(2) The spouse shall have only the status of an assignee of the Partner’s right to receive profits and losses of the Partnership under provisions of Corporations Code §16503;
(3) As between the Partner and Spouse, the Partner shall continue to have the exclusive right and authority to act as a partner on behalf of and bind the Partnership as specified in this Agreement; and
(4) Any action, consent, or approval taken or given or any document or instrument executed by the Partner on his or her own behalf (and on behalf of Spouse as an assignee under this Agreement) shall be binding on the Partner and Spouse, and the other Partners and any third party shall be entitled to rely on any action so taken by such Partner in accordance with this Agreement.

Right of First Refusal

Right of First Refusal. If any Partner receives an offer, whether or not solicited by that Partner, from a person not then a Partner to purchase all or any portion of the Partner’s interest in the Partnership, and, if the Partner receiving the offer is willing to accept it, the Partner may transfer the interest or portion specified in the offer only after he or she has afforded the Partnership and the other Partners the following rights of first refusal:

(1) The Partner desiring to make the transfer must first notify the Partnership and each of the other Partners in writing of the interest or portion the Partner proposes to transfer, the price and terms on which it is proposed to be transferred, and the identity of the proposed transferee.
(2) The Partnership shall have the option to purchase that interest or portion from the Partner at a price equal to the lesser of (a) the value of the interest or portion, computed under the provisions of this Agreement for valuing Partnership interests as of the date the notice of the proposed transfer is received by the Partnership, payable as provided in this Agreement, or (b) the same price and on the same terms as those specified in the notice of the proposed transfer. The Partnership shall exercise its option to purchase the interest or portion by written notice from the Partnership to the Partner, given within _ _[number]_ _ days after the Partnership receives the Partner’s notice of his or her desire to transfer.
(3) If the Partnership does not exercise its option to purchase the interest or portion within the time provided, then, within _ _[number]_ _ days after the Partnership receives the Partner’s notice of the proposed transfer, any of the other Partners desiring to purchase all or any part of that interest or portion may deliver to the Partner who proposed to make the transfer and to each of the other Partners written notice of election to purchase all or a specified part of the interest or portion.
(4) If the aggregate parts of the interest or portion specified in notices of election timely made by other Partners equal or exceed the entire offered interest or portion, the Partner desiring to transfer his or her interest or portion shall sell, and the Partners electing to purchase shall purchase, the interest or portion at a price equal to the lesser of (a) the value, as of the date the notice of the proposed transfer is received by the Partnership, of the interest or portion computed under the provisions of this Agreement for valuing Partnership interests, payable as provided in this Agreement, or (b) the same price and on the same terms as those specified in the notice of the proposed transfer. If the aggregate parts of the interest specified in the notices of election timely made exceed the entire interest or portion proposed to be transferred, each Partner making this election shall purchase such part of the offered interest and be liable for such part of the total amount of the purchase price as the part of the interest or portion specified in that Partner’s notice of election bears to the total of all parts of the interest or portion specified in all the notices of election timely made by Partners.
(5) If the Partnership does not exercise its option to purchase the interest within the time provided and if the aggregate parts of the interest or portion specified in the notices of election timely made by Partners are less than the entire interest or portion proposed to be transferred, all of the elections shall be ineffective and the Partner proposing to make the transfer shall not be obligated to sell, nor shall any of the other Partners electing to purchase be entitled or obligated to purchase, all or any part of the offered interest or portion. The Partner proposing to transfer an interest or portion may then, at any time within _ _[number]_ _ days following the expiration of the _ _[number]_ __-day period referred to in paragraph (3), transfer the specified interest or portion to the transferee specified in the notice on terms no more favorable to the purchaser than the terms stated in the notice and at no lower a price than the price stated in the notice.

Valuation of Interest

Add one of the following alternatives’
Alternative 1: Value of partner’s interest based on capital account

Valuation of Interest. The value of a Partner’s interest in the Partnership for purposes of this Agreement shall be calculated by taking into account the following items as of the date the value is to be determined, as these items are reflected on the Partnership’s regularly maintained accounting books and records:

(1) The balance in the Partner’s capital account;
(2) Plus the Partner’s proportionate share of the Partnership’s net profit for the current fiscal year to the date as of which the computation is made and not yet reflected in the Partner’s capital or drawing account;
(3) Less the Partner’s proportional share of any loss shown by the Partnership operations for that period;
(4) Plus any debt or other amount due to the Partner from the Partnership; but
(5) Less any debt owed by the Partner to the Partnership.
Alternative 2: Valuation of partner’s interest by agreement

Valuation of Interest. The value of a Partner’s interest in the Partnership for purposes of this Agreement shall be calculated by applying that Partner’s proportional interest in _ _[e.g., current profits/aggregate capital]_ _ to the value of the Partnership, which shall be determined as follows:

(1) Within _ _[number]_ _ days after the end of each fiscal year of the Partnership, the Partners shall, after due consideration of all factors they consider relevant, determine the Partnership’s value by unanimous written agreement. That value shall remain in effect for the purposes of this Agreement from the date of that written determination until the next such written determination, except as otherwise provided below. The valuation shall be entered on Exhibit _ _[specify number or letter]_ _ and all Partners shall initial the entry.
(2) Should the Partners be unable to agree on a value or otherwise fail to make any such determination, the Partnership’s value shall be the greater of (a) the value last established under this section, or (b) the Partnership’s net worth, determined in accordance with generally accepted accounting principles using the accrual method of accounting, consistently applied, as of the end of the Partnership’s next preceding fiscal year.
(3) Until it is otherwise determined under this section, the Partnership’s value shall be the aggregate initial capital contributions required under this Agreement and actually paid or conveyed to the Partnership.
Alternative 3: Valuation of partner’s interest by appraisal

Valuation of Interest. The value of a Partner’s interest in the Partnership for purposes of this Agreement shall be determined by appraisal as follows:

(1) Within _ _[number]_ _ days after the event requiring appraisal or within _ _[number]_ _ days after appointment of a Partner’s personal representative following the Partner’s death or legal disability, the Partnership and the Partner whose interest is to be appraised (or that Partner’s personal representative) shall jointly appoint an appraiser for this purpose, or, failing this joint action, shall each separately designate an appraiser and within _ _[number]_ _ days after their appointment, the two designated appraisers shall jointly designate a third appraiser. The failure of either the Partnership or the Partner whose interest is being appraised (or that Partner’s personal representative) to appoint an appraiser within the time allowed shall be deemed equivalent to appointment of the appraiser appointed by the other party. No person shall be appointed or designated an appraiser unless that person is then a member of _ _[name of trade association or other qualifying body]_ _.
(2) If, within _ _[number]_ _ days after the appointment of all appraisers, a majority of the appraisers concur on the value of the interest being appraised, that appraisal shall be binding and conclusive. If a majority of the appraisers do not concur within that period, the determination of the appraiser whose appraisal is neither highest nor lowest shall be binding and conclusive. The Partnership and the Partner whose interest is to be appraised, or that Partner’s estate or successors, shall share the appraisal expenses equally.
(3) A Partner’s interest in the Partnership so appraised shall be based on that Partner’s proportional interest in the Partnership’s _ _[e.g., current profits/aggregate capital]_ _.

In arriving at a valuation figure, the appraisers shall evaluate the business as a going concern and observe the following standards but not be limited to them in computing the Partnership’s value:

(1) Inventory shall be valued at the lower of cost or fair market value.
(2) Buildings and land shall be valued at fair market value.
(3) Machinery and equipment shall be valued at replacement cost.
(4) The existence of a willing purchaser shall be assumed when determining fair market value.
(5) A valuation shall be placed on items of substantial value not carried on the Partnership’s books.
(6) Investment securities owned by the Partnership for which there is an established trading market shall be valued at the market price on the effective date of valuation. For this purpose, market price means (a) for securities listed on any national securities exchange or for which sales are reported on NASDAQ, the last reported sales price on that date (or, if no sales on that date are reported, on the next preceding day for which sales were reported), and (b) for other publicly traded securities, the mean between the highest bid and lowest asked prices reported for these securities on that date (or, if no such prices are reported on that date, on the next preceding day for which such prices were reported).
(7) Investment securities owned by the Partnership for which there is no established trading market shall be valued at the amounts at which they are carried on the Partnership’s books in accordance with generally accepted accounting principles, including the equity method under Opinion 18 of the Accounting Principles Board to the extent applicable.
(8) Contingent items shall not be specifically deducted from the valuation figure, but they shall be considered in assessing the value of the Partnership’s goodwill.
(9) Goodwill, including trademarks, trade names, and other intangibles of commercial value such as patents, shall be considered in arriving at a valuation figure.
(10) Past, present, and prospective earnings, including the existing and prospective economic condition of the industry, shall be considered in arriving at a valuation figure.
(11) Adjustments shall be made for the federal and state income tax effect on the differences between tax bases and the market values determined by the appraisers.
Alternative 4: Put/call option setting price

Valuation of Interest. Either Partner (the “Offering Partner”) may give written notice to the other Partner (the “Accepting Partner”) of the Offering Partner’s intent to sell its interests in the Partnership in accordance with these provisions, stating in its written notice the cash purchase price at which the Offering Partner is willing to sell its interest in the Partnership. On receipt of such written notice, the Accepting Partner shall then be obligated to either (a) purchase all of the interest of the Offering Partner for cash at a price equal to the purchase price set forth in the written notice; or (b) sell its interest for cash to the Offering Partner at a price equal to the purchase price set forth in the written notice.

Payment of Purchase Price

Add one or more of the following alternatives’
Alternative 1: Cash

Payment of Purchase Price. Except as otherwise provided, whenever the Partnership is obligated or, having the right to do so, chooses to purchase a Partner’s interest, it shall pay for the interest in cash within _ _[number]_ _ days after the date on which the Partnership’s obligation to pay has become fixed.

Alternative 2: Cash or note

Payment of Purchase Price. Except as otherwise provided, whenever the Partnership is obligated or, having the right to do so, chooses to purchase a Partner’s interest, it shall pay for that interest, at its option, in cash or by promissory note of the Partnership, or partly in cash and partly by note. Any promissory note shall be dated as of the effective date of the purchase, shall mature in not more than _ _[number]_ _ years, shall be payable in installments that come due not less frequently than annually, shall bear interest at the rate of _ _[number]_ _ percent per annum, and may, at the Partnership’s option, be subordinated to existing and future debts to banks and other institutional lenders for money borrowed.

If applicable, add the following option
Option: Limiting amount due

After adding back all direct and indirect Partner remuneration, _ _[number]_ _ percent of the Partnership’s taxable income may be used for payment of a Partner’s or Partners’ interests. Any payment deferred under this section shall bear interest at the same rate applicable to the balance of the note. If deferred payments under this section are not paid within _ _[number]_ _ years of deferral, the Partnership shall be dissolved and the proceeds of dissolution shall be used to liquidate the balance due on the note.

Assumption of Outstanding Partnership Liabilities

Assumption of Outstanding Partnership Liabilities. Except as otherwise provided, the Partnership shall pay, as they mature, all Partnership obligations and liabilities that exist on the effective date of a Partner’s termination and shall hold the terminating Partner harmless from any action or claim arising or alleged to arise from those obligations or from liabilities accruing after that date.

Dissolution and Termination

Dissolution

Events of Dissolution. The Partnership shall be dissolved, and its business shall be wound up, only on the occurrence of any of the following events:

Add one of the following alternatives
Alternative 1: Dissolution of partnership at will by one-half of the partners
(1) The express will to dissolve and wind up the Partnership business of at least one-half of the Partners, including Partners other than wrongfully dissociating Partners who have dissociated within the preceding 90 days, and for which purpose dissociation notice from such Partners constitutes an expression of those Partners’ will to dissolve and wind up the Partnership business.
Alternative 2: Dissolution of partnership at will by all partners
(1) The express will of all of the Partners to wind up the Partnership business.
(2) The expiration of the Partnership term or completion of the undertaking if the Partnership is organized for a specific undertaking.
(3) On expiration of 90 days after a Partner’s dissociation by death, bankruptcy, incapacity, distribution by a trust or estate Partner of its entire interest, or termination of any entity Partner, or by a Partner’s wrongful dissociation, unless before that time a majority in interest of the Partners agree to continue the Partnership.
(4) Any event that makes it unlawful for all or substantially all of the Partnership business to be continued if such event is not cured within 90 days after notice to the Partnership of the event.
(5) On application by a Partner, a judicial determination that any of the following apply:
(a) The economic purpose of the Partnership is likely to be unreasonably frustrated.
(b) Another Partner has engaged in conduct relating to the Partnership business that makes it not reasonably practicable to carry on the business in Partnership with that Partner.
(c) It is not otherwise reasonably practicable to carry on the Partnership business in conformity with the Partnership agreement.
(6) As otherwise set forth in this Partnership Agreement.

Termination of Partnership After Dissolution; Waiver of Termination

Termination After Dissolution; Waiver. (1) Except as provided in this Agreement, the Partnership continues after dissolution only for the purpose of winding up its business. The Partnership is terminated when the winding up of its business is completed.

(2) At any time after the dissolution of the Partnership and before the winding up of its business is completed, all of the Partners, including any dissociating Partner (other than a wrongfully dissociating Partner) may waive the right to have the Partnership’s business wound up and the Partnership terminated. On such event, both of the following shall occur:
(a) The Partnership resumes carrying on its business as if dissolution had never occurred, and any liability incurred by the Partnership or a Partner after the dissolution and before the waiver is determined as if dissolution had never occurred; and
(b) The rights of any third party accruing after commencement of dissolution or arising out of conduct in reliance on the dissolution before the third party knew or received a notification of the waiver may not be adversely affected.

Persons Eligible to Wind Up Partnership

Persons Eligible to Wind Up Partnership. (1) After dissolution, a Partner who has not dissociated may participate in winding up the Partnership’s business, subject to the right of a Partner or its legal representative to petition the court, for good cause shown, for judicial supervision.

(2) The legal representative of the last surviving Partner may wind up a Partner’s business.
(3) The person winding up the Partnership business shall have all of the powers given by law to wind up the affairs of the Partnership.
(4) On dissolution, the Partnership shall cause to be filed a statement of dissolution under California Corporations Code §16805.

Distribution of Assets

Distribution of Assets. (1) On the winding up of the Partnership’s business, the assets of the Partnership, including any contributions by the Partners required in this Agreement, shall be applied to discharge its obligations to creditors, including to the extent permitted by law Partners who are creditors. Any surplus shall be applied to pay in cash the net amount distributable to Partners in accordance with their rights to distributions under this Agreement.

(2) Each Partner shall be entitled to a settlement of all Partnership accounts on winding up the Partnership business. In settling accounts among the Partners, the profits and losses that result from liquidation of the Partnership assets shall be credited and charged to the Partners’ accounts. The Partnership shall make a distribution to a Partner in an amount equal to any excess of the credits over the charges in the Partner’s account. A Partner shall contribute to the Partnership an amount equal to any excess of the charges over the credits in the Partner’s account.
(3) If a Partner fails to contribute the full amount that the Partner is obligated to contribute under this section, all of the other Partners shall contribute, in the proportions in which those Partners share Partnership losses, the additional amount necessary to satisfy the Partnership obligations. A Partner or its legal representative shall be entitled to recover from the other Partners any contribution the Partner makes to the extent the amount contributed exceeds that Partner’s share of the Partnership obligations for which the Partner is personally liable. The estate of a deceased Partner shall remain liable for that Partner’s obligations to contribute to the Partnership.
(4) After the settlement of accounts, each Partner shall contribute, in the proportion in which the Partner shares the Partnership losses, the amount necessary to satisfy Partnership obligations that were not known at the time of settlement for which the Partner is personally liable.

Indemnification

Indemnification. Except as otherwise provided in this Agreement, a Partner shall not be liable to, and the Partnership shall indemnify and hold the Partner harmless from, any and all expense and liability resulting from or arising out of any negligence or misconduct on the Partner’s part to the extent that the amount is not covered by the applicable insurance carried by the Partnership; provided, however, that there shall be no indemnification if it is determined that the Partner’s conduct is grossly negligent or reckless or if the Partner engages in any willful and material breach of any other obligations under this Agreement.

Miscellaneous Clauses

Amendments. This agreement may be amended at any time and from time to time by a writing signed by each person who is then a Partner.

Notices. Any written notice to any of the Partners required or permitted under this Agreement shall be deemed to have been duly given (a) on the date of service if served personally on the party to whom notice is to be given, or (b) on the _ _[e.g., second]_ _ day after mailing if mailed to the party to whom notice is to be given, first class postage prepaid, return receipt requested, and addressed to the addressee at the address stated opposite his or her name below or at the most recent address specified by written notice given to the sender by the addressee under this clause. Notices to the Partnership shall be similarly given, and addressed to it at its principal place of business.

Counterparts. The parties may execute this Agreement in two or more counterparts, which shall, in the aggregate, be signed by all the parties and constitute one agreement. Each counterpart shall be deemed an original instrument as against any party who has signed it.

Governing Law. This agreement is executed in and intended to be performed in the State of California, and the laws of that state (other than as to choice of laws) shall govern its interpretation and effect.

Successors. This agreement shall be binding on and inure to the benefit of the respective successors, assigns, and personal representatives of the parties, except to the extent of any contrary provision in this Agreement.

Severability. If any term, provision, covenant, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the rest of the agreement shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.

Headings. Section, paragraph, and other headings contained in this Agreement are for reference purposes only and are in no way intended to describe, interpret, define, amplify, or limit the scope, extent, or intent of this Agreement or any provision of it.

Further Action. Each Partner shall execute and deliver such papers, documents, and instruments, and perform such acts as are necessary or appropriate, to implement the terms of the agreement and the intent of the parties to this Agreement.

Waiver of Partition Action. Each of the parties to this Agreement irrevocably waives, during the term of the Partnership, any right that it may have to maintain any action for partition with respect to the Partnership properties.

Construction. In construing this Agreement, no consideration shall be given to the fact or presumption that any party had a greater or lesser hand in drafting it.

Gender. In construing this Agreement, pronouns of any gender shall be deemed to include the other gender.

Incorporation by Reference. Every exhibit, schedule, and other appendix attached to and referred to in this Agreement is incorporated in this Agreement by reference.

Attorney Fees. If any party requires the services of an attorney to secure the performance of this Agreement or otherwise on the breach or default of another party to this Agreement, or, if any judicial remedy or arbitration is necessary to enforce or interpret any provision of this Agreement or the rights and duties of any person in relation to it, the prevailing party shall be entitled to reasonable attorney fees, costs, and other expenses, in addition to any other relief to which such party may be entitled. Any award of damages following judicial remedy or arbitration as a result of the breach of this Agreement or any of its provisions shall include an award of prejudgment interest from the date of the breach at the maximum amount of interest allowed by law.

Entire Agreement. This Agreement contains the entire agreement of the parties relating to the rights granted and obligations assumed in this Agreement. Any oral representations or modifications concerning this instrument shall be of no force or effect unless contained in a subsequent written modification signed by the party to be charged.

Arbitration. Any controversy among the Partners involving the construction or application of any provision of this Agreement shall be submitted to arbitration at _ _[location]_ _, California, on the request of any Partner. Arbitration shall comply with and be governed under the provisions of the _ _[e.g., California Arbitration Act/commercial arbitration rules of the American Arbitration Association]_ _.

Execution

Execution

IN WITNESS WHEREOF, the Partners have executed this Agreement effective as of the date set forth above.

Date: _ _ _ _ _ _ __[Signature]__ _ _[Typed name]_ _ _ _[Address]_ _

Date: _ _ _ _ _ _ __[Signature]__ _ _[Typed name]_ _ _ _[Address]_ _

Date: _ _ _ _ _ _ __[Signature]__ _ _[Typed name]_ _ _ _[Address]_ _

Date: _ _ _ _ _ _ __[Signature]__ _ _[Typed name]_ _ _ _[Address]_ _

Exhibit _ _[specify number or letter]_ _

Consent of Spouses

Consent of Spouses

We certify that:

(1) We are the spouses of the persons who signed the foregoing Partnership Agreement and who constitute the members of the Partnership described in that Agreement.

(2) We have read and approve the provisions of that Partnership Agreement, including but not limited to those relating to the purchase, sale, or other disposition of the interest of a deceased, retiring, withdrawing, or terminating Partner.

(3) We agree to be bound by and accept those provisions of that Partnership Agreement in place of all other interests we, or any of us, may have in that Partnership, whether the interest may be community property or otherwise.

(4) Our spouses shall have full power of management of their interests in the Partnership, including any portion of those interests that are our community property, and they have the full right, without our further approval, to exercise their voting rights as Partners in the Partnership, to execute any amendments to the Partnership Agreement, and to sell, transfer, encumber, and deal in any manner with those Partnership interests, including any portion of those interests that are our community property.

Executed on _ _[date]_ _, at _ _[location]_ _, California.

__[Signature of spouse]__ _ _[Typed name]_ _

__[Signature of spouse]__ _ _[Typed name]_ _

__[Signature of spouse]__ _ _[Typed name]_ _

__[Signature of spouse]__ _ _[Typed name]_ _

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