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Two Partners--Fiscal Year Partnership
TWO PARTNERS-FISCAL YEAR PARTNERSHIP
AGREEMENT made [Date of agreement] between [Name of First partner] and [Name of Second partner], from [Address of first partner] and [Address of Second partner]
1. Name and business.
The parties hereby form a partnership under the name of to conduct a business. The principal office of the business shall be in [Principal place of business]
2. Term.
The partnership shall begin on [First date of partnership] and shall continue until terminated as herein provided.
3. Capital.
The capital of the partnership shall be contributed in cash by the partners as follows:
$ [Contribution of first partner]
$ [Contribution of second partner]
A separate capital account shall be maintained for each partner. Neither partner shall withdraw any part of his capital account. Each partners capital account shall be determined and maintained throughout the term of the partnership in accordance with the requirements of Section 704.b of the Internal Revenue Code of 1986, or its counterpart in any subsequently enacted Internal Revenue Code "the Code", and any of the Treasury Regulations "the Regulations" promulgated from time to time thereunder.
4. Profit and loss.
The net profits of the partnership shall be divided equally between the partners and the net losses shall be borne equally by them. A separate income account shall be maintained for each partner. Partnership profits and losses shall be charged or credited to the separate income account of each partner. If a partner has no credit balance in his income account, losses shall be charged to his capital account. The profits and losses of the partnership shall be determined in the manner in which the partnership reports its income and expenses for federal income tax return purposes.
5. Salaries and drawings.
Neither partner shall receive any salary for services rendered to the partnership. Each partner may, from time to time, withdraw the credit balance in his income account. No additional share of profits shall inure to either partner by reason of his capital or income account being in excess of the capital or income account of the other.
6. Interest.
No interest shall be paid on the initial contributions to the capital of the partnership or on any subsequent contributions of capital.
7. Management, duties, and restrictions.
The partners shall have equal rights in the management of the partnership business, and each partner shall devote his entire time to the conduct of the business. Neither partner shall, without the consent of the other partner, endorse any note, or act as an accommodation party, or otherwise become surety for any person. Without the consent of the other partner neither partner shall on behalf of the partnership borrow or lend money, or make, deliver, or accept any commercial paper, or execute any mortgage, security agreement, bond, or lease, or purchase or contract to purchase, or sell or contract to sell any property for or of the partnership other than the type of property bought and sold in the regular course of its business. Neither partner shall, except with the consent of the other partner, assign, mortgage, grant a security interest in, or sell his share in the partnership or in its capital assets or property, or enter into any agreement as a result of which any person shall become interested with him in the partnership, or do any act detrimental to the best interests of the partnership or which would make it impossible to carry on the ordinary business of the partnership.
8. Banking.
All funds of the partnership shall be deposited in its name in such checking account or accounts as shall be designated by the partners. All withdrawals therefrom are to be made upon checks signed by either partner.
9. Books.
The partnership books shall be maintained at the principal office of the partnership, and each partner shall at all times have access thereto. The books shall be kept on a fiscal year basis, commencing [First month of fiscal year] and ending [Last month of fiscal year], and shall be closed and balanced at the end of each fiscal year. An audit shall be made as of the closing date.
10. Voluntary termination.
The partnership may be dissolved at any time by agreement of the partners, in which event the partners shall proceed with reasonable promptness to liquidate the business of the partnership. The partnership name shall be sold with the other assets of the business. The proceeds of such liquidation shall be applied in the following order of priority: i. to the payment of any debts and liabilities of the partnership ii. to the setting up of any reserve which the partners shall reasonably deem necessary to provide for any contingent or unforeseen liabilities or obligations of the partnership. At the expiration of such period of time as the partners shall deem advisable, the balance of such reserve remaining after the payment of such contingency shall be distributed in the manner hereinafter set forth iii. thereafter, the balance of the proceeds, if any, shall be distributed in accordance with the positive capital account balances of the partners, as determined after taking into account all capital account adjustments for the partnership taxable year during which such liquidation occurs, and shall be made by the end of such taxable year or, if later, within days after the date of such liquidation. For purposes of this subparagraph, a liquidation of the partnership shall mean a liquidation as set forth in Section 1.704-1.b.2.ii.g. of the Regulations.
If, following the liquidation of a partners interest in the partnership within the meaning of Treasury Regulations Section 1.704-b.2.ii.g, a partner has a deficit balance in his capital account, as determined after taking into account all adjustments to said capital account, including the adjustments for the year during which such liquidation occurs, such partner shall be unconditionally obligated to pay the amount of such deficit balance to the partnership by the end of such taxable year or, if later, within [Number of days after liquidation] days after the date of such liquidation, which amount shall be applied and distributed in accordance with the provisions of this paragraph 1.
1. Retirement.
Either partner shall have the right to retire from the partnership at the end of any fiscal year. Written notice of intention to retire shall be served upon the other partner at the office of the partnership at least three months before the end of the fiscal year. The remaining partner shall have the right either to purchase the retiring partners interest in the partnership or to terminate and liquidate the partnership business. If the remaining partner elects to purchase the interest of the retiring partner, he shall serve notice in writing of such election upon the retiring partner at the office of the partnership within two months after receipt of his notice of intention to retire.
a. If the remaining partner elects to purchase the interest of the retiring partner in the partnership, the purchase price and method of payment shall be the same as stated in paragraph 12 with reference to the purchase of a decedents interest in the partnership.
b. If the remaining partner does not elect to purchase the interest of the retiring partner in the partnership, the partners shall proceed with reasonable promptness to liquidate the business of the partnership. The procedure as to liquidation and distribution of the assets of the partnership business shall be the same as stated in paragraph 10 with reference to voluntary termination.
12. Death.
Upon the death of either partner, the surviving partner shall have the right either to purchase the interest of the decedent in the partnership or to terminate and liquidate the partnership business. If the surviving partner elects to purchase the decedents interest, he shall serve notice in writing of such election, within three months after the death of the decedent, upon the executor or administrator of the decedent, or, if at the time of such election no legal representative has been appointed, upon any one of the known legal heirs of the decedent at the last-known address of such heir.
a. If the surviving partner elects to purchase the interest of the decedent in the partnership, the purchase price shall be equal to the decedents capital account as at the date of his death plus the decedents income account as at the end of the prior fiscal year, increased by his share of partnership profits or decreased by his share of partnership losses for the period from the beginning of the fiscal year in which his death occurred until the end of the calendar month in which his death occurred, and decreased by withdrawals charged to his income account during such period. No allowance shall be made for goodwill, trade name, patents, or other intangible assets, except as those assets have been reflected on the partnership books immediately prior to the decedents death but the survivor shall nevertheless be entitled to use the trade name of the partnership. The purchase price shall be paid with interest at the rate of 9 percent per annum in four semiannual installments beginning six months after the end of the calendar month in which the decedents death occurred.
b. If the surviving partner does not elect to purchase the interest of the decedent in the partnership, he shall proceed with reasonable promptness to liquidate the business of the partnership. The surviving partner and the estate of the deceased partner shall share equally in the profits and losses of the business during the period of liquidation, except that the decedents estate shall not be liable for losses in excess of the decedents interest in the partnership at the time of his death. No compensation shall be paid to the surviving partner for his services in liquidation. Except as herein otherwise stated, the procedure as to liquidation and distribution of the assets of the partnership business shall be the same as stated in paragraph 10 with reference to voluntary termination.
13. Arbitration.
Any controversy or claim arising out of or relating to this Agreement, or the breach hereof, shall be settled by arbitration in accordance with the rules, then obtaining, of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereof.
In witness whereof the parties have signed this Agreement.
Signature Date
Signature Date
Signature Date