Key items that should be covered in partnership agreement when setting up partnership include the following:
- Capital, a partnership agreement should state how much each partner is putting into and leaving in the partnership.
- Profit sharing ratio; the partnership agreement should include how any profits are to be split between the various partners;
- Goodwill; the partnership agreement should state whether the business will be valued and goodwill allowed to be brought into partnership accounts or not.
- Drawings; the partnership agreement should include details of the amount of drawings allowed by partnership to partners.
- Interest on capital and drawings; the agreement should disclose the interest rate that partners are entitled to, based on the amount of capital invested in the partnership, or the interest to be paid to the partnership based on drawing from partnership . If no interest on capital or drawings is being paid/received, this should be included in the partnership agreement.
- Partners salaries; the agreement should state what , if any , and when salaries are to be paid to partners.
- Admittance/amalgamation/dissolution of partnership; the partnership agreement should include details on these three aspects of the partnership.