Going Into Business With a Partner: What an Agreement Actually Protects

Under the Partnership Act, 2012, a partnership can exist without any written agreement — simply by carrying on business together with a view to profit. Without one, the Act's default rules apply, and they rarely match what partners would actually choose.

What the law gives you by default

• Profits and losses shared equally, regardless of actual contribution
• Any partner can bind the partnership in ordinary business contracts
• The partnership can dissolve on a single partner's death or exit, unless the agreement says otherwise
• No built-in mechanism for buying out a departing partner

What a well-drafted agreement should cover

Capital contributions, a profit-sharing formula reflecting actual input, decision-making authority, roles, exit and buyout terms, dispute resolution, and non-compete provisions.

A note on liability

Ordinary partners carry unlimited personal liability — including for debts a partner ran up without your knowledge. Where that risk doesn't suit the business, a Limited Liability Partnership under the LLP Act, 2011 separates the partnership's liabilities from partners' personal assets.

We draft agreements around how partners actually intend to run the business — not a template with names swapped in.

This article is general information, not legal advice, and reflects the law as it currently stands. Rates, fees, and procedures are subject to change.