Journal About Legal Insights

You've found the perfect business partner. You're finishing each other's sentences, sketching ideas on napkins, and already planning your third location. Here's what typically happens next: you shake hands, split the initial costs 50/50, and dive into operations. Fast forward eighteen months—one of you is working 70-hour weeks while the other treats this as a side hustle, and nobody documented who actually owns what percentage.

I've watched this scenario destroy friendships and tank profitable businesses. Written partnership agreements aren't just paperwork—they're your insurance policy against the inevitable moments when memory, motivation, or money becomes disputed territory.

According to the National Federation of Independent Business, nearly 70% of business partnerships lack formal written agreements. Those partnerships fail at dramatically higher rates than documented ones, usually over preventable disagreements about contributions, control, or cash.

What Makes a Partnership Agreement Legally Binding in the US

Your partnership agreement gains legal teeth when it includes four elements: offer (one partner proposes terms), acceptance (others agree to those terms), consideration (each partner contributes something valuable), and mutual intent (everyone understands they're creating a business relationship). That's the baseline. Here's where it gets interesting.

General partnerships expose you to unlimited personal liability. If your partner signs a disastrous lease or causes a cu...