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The California partnership agreement is a legal document business partners use to outline all the details about their business entity.
The partnership agreement or partnership contract often includes details about the initial capital investment each partner must make, the ways in which the business is going to be managed, the rules under which profits and losses are going to be divided between the partners, and other details relevant to their business partnership.
In California, the partnership agreement is also often referred to as a “partnership deed” or “articles of partnership.”
California Partnership Agreement Types
When establishing a business in California, there are a few types of partnership agreements the partners can choose from:
Types of Partnership Agreement
General Partnerships (GP): This type of partnership enables all the partners to participate in the decision-making process. Moreover, all the partners have unlimited liability for the business with their personal assets. (§ 15904.01 – 15904.09)
Limited Partnership (LP): This is the partnership between the general partners that have decision-making powers and unlimited liability and the limited partners that have limited liability but are not able to make decisions. (§ 15903.01 – 15903.07)
Limited Liability Partnership (LLP): All partners have decision-making powers, and they are not liable for the actions of other partners. (§ 16951 – 16962)
Limited Liability Companies (LLC): Partners are liable for the business up to the amount they have invested in the company, and they can make decisions themselves or authorize another person to manage the company. (§ 17701.01 – 17701.17)
California Partnership Agreement Requirements
The partnership agreement format in California should include the following elements:
Mandatory Requirements
Information about the partners
Dates of partnership establishment
Information about the investment and share of each partner
Rules on partnership management and voting
Details about the profit distribution
Rules on how the eventual business losses will be covered