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The Alabama Partnership Agreement is a legal document that outlines all the details of the business relationship between the business partners. It provides details on their roles and responsibilities, and it defines how profits and losses are going to be shared between them.
The partnership agreement, or partnership contract, enables the business partners to customize the general state or federal regulations on partnership and adjust them to their specific business model.
Without it, the relationship between the business partners will be regulated by vague state law, which can later result in potential misunderstandings and disputes between the parties.
The partnership agreement is also commonly referred to as the partnership deed or articles of partnership.
Alabama Partnership Agreement Types
Alabama provides different types of business partnerships that the business partners can establish according to the nature of their businesses:
Types of Partnership Agreement
General Partnerships (GP): All partners participate in decision-making, and they all have unlimited liability with their personal assets. (Title 10A, Chapter 8A)
Limited Partnership (LP): Partnership between the general partners that are able to make decisions and have unlimited liability and limited partners that are not able to make decisions but have limited liability. (§ 10A-9A-2.01)
Limited Liability Partnership (LLP): All partners have equal authority to make decisions, and they are protected from liabilities caused by the actions of other partners. (§ 10A-8A-10.01)
Limited Liability Companies (LLC): Partners have limited liability to the level of their investment, and they can make decisions themselves or authorize another person to manage the company. (Title 10A, Chapter 5A)
Alabama Partnership Agreement Requirements
The Alabama partnership agreement format should include the following:
Mandatory Requirements
Details about the partners
Information about the beginning and the end of the partnership
Information about the contributions of each partner
Description of each partner's role in the partnership
Rules on how the profits are distributed between the partners
Rules on how the eventual business losses will be covered