A partnership agreement is an agreement between two or more parties who wish to enter into business together in the form of a partnership.
A partnership is governed by any partnership agreement entered into by the partners and the relevant State legislation. Unlike a company, a partnership is not a separate legal entity, although it must have a tax file number (TFN) and an Australian business number (ABN) and must lodge a tax return. Each partner must pay tax on the proportion of partnership income that they receive in a financial year and the partners are jointly and severally liable for the debts and liabilities of the partnership.
A partnership agreement sets out the terms of a partnership. These terms may include the purpose of the partnership, name of the business operated by the partnership, details of the partners, rights, responsibilities and obligations of the partners, how profits and losses are to be divided among the partners and how long the partnership is intended to operate. It is designed to document the relationship of the partners, much like a shareholders agreement documents the relationship of the shareholders of a company.