TWO
PARTNERS’ FISCAL YEAR PARTNERSHIP
AGREEMENT
made ___________________________ (Month & Day), ____________ (Year), between ______________________________ and
_________________________, from _______________________________ and
__________________________________.
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 ____________________________________.
2. Term. The partnership shall begin on
___________________________ (Month & Day), ____________ (Year) 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:
___________________________________ $_______________
___________________________________ $_______________
___________________________________ $_______________
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 _________________________ (Date) and
ending ________________________ (Date), 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 1.704-1(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 _______ days after the date of
such liquidation), which amount shall be applied and distributed in accordance
with the provisions of this paragraph.
11. 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/her death. No compensation
shall be paid to the surviving partner for his/her 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
