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Sample Partnership Agreement


5.2. An individual capital account shall be maintained for each Partner. The capital account of each Partner shall consist of his or her original capital contribution, increased by (a) additional capital contributions made by him or her, (b) his or her share of Partnership profits, and decreased by (i) distributions of such profits and capital to him or her, and (ii) his or her share of Partnership losses.

5.3. Except as specifically provided in this Agreement, or as otherwise provided by and in accordance with law to the extent such law is not inconsistent with this Agreement, no Partner shall have the right to withdraw or reduce his or her contributions to the capital of the Partnership.

Section 6. Profit and Loss

6.1. The percentages of Partnership Rights and Partnership Interest of each of the Partners shall be as follows:

Doe50 %
Smith50 %

6.2. Except as provided in Section 7.3. of this Agreement, for purposes of Sections 702 and 704 of the Internal Revenue Code of 1954, or the corresponding provisions of any future federal internal revenue law, or any similar tax law of any state or jurisdiction, the determination of each Partner's distributive share of all items of income, gain, loss, deduction, credit or allowance of the Partnership for any period or year shall be made in accordance with, and in proportion to, such Partner's percentage of Partnership Interest as it may then exist.

Section 7. Distribution of Profits

7.1. The net cash from operations of the Partnership shall be distributed at such times as may be determined by the Partners in accordance with Section 8 of this Agreement among the Partners in proportion to their respective percentages of Partnership Interest, provided, however, that no amount of net cash from operations shall be distributed during any fiscal year of the Partnership until after the Partnership has paid any required installment of the aggregate Purchase Price or Special Aggregate Purchase Price, as the case may be, provided in Section 19 hereof.

7.2. As used in this Section 7, the term "net cash from operations" shall mean:

7.2.1. The taxable income of the Partnership for federal income tax purposes as shown on the books of the Partnership, increased by (a) the amount of depreciation and amortization deductions taken in computing such taxable income and (b) any non-taxable income or receipts of the Partnership, and reduced by (i) payments upon the principal of any installment obligations, mortgages or deeds of trust respecting Partnership assets or of other Partnership debts, and (ii) such expenditures for capital improvements or replacements, such reserves for said improvements and replacements and such reserves for repairs and to meet anticipated expenses and for working capital as the Partners, in accordance with Section 8 of this Agreement, shall deem to be reasonably necessary in the efficient conduct of the business; plus

7.2.2. Any excess funds resulting from the placement, or excess of refinancing of, any mortgages or deeds of trust on Partnership Property or the encumbrancing or financing of such Property in any other manner; plus

7.2.3. Any other funds (including amounts previously set aside for reserves by the Partners, in accordance with Section 8 of this Agreement, to the extent the Partner, in accordance with Section 8 of this Agreement, no longer regards such reserves as reasonably necessary in the efficient conduct of the Partnership business) deemed available for the distribution by the Partners, in accordance with Section 8 of this Agreement.

7.2.4. In determining the amount of net cash from operations any negative balances in any category described in Section 7.2.1., 7.2.2. and 7.2.3. shall be netted against the positive balances in the other such categories. Cumulative negative or positive balances shall be carried forward.

7.3. In addition to the distributions pursuant to Section 7.1. of this Agreement, upon any sale, transfer or other disposition of any capital asset of the Partnership (hereinafter referred to as a "Disposition"), the proceeds of such Disposition shall first be applied to the payment or repayment of any selling or other expenses incurred in connection with the Disposition and to the payment of any indebtedness secured by the asset subject to the Disposition immediately prior thereto; all proceeds remaining thereafter (the "Net Proceeds") shall be retained by the Partnership or be distributed, at such time or times as shall be determined by the Partners in accordance with Section 8 of this Agreement to the Partners in proportion to their respective percentages of Partnership Interest; provided, however, that for purposes of Sections 702 and 704 of the Internal Revenue Code of 1954, or the corresponding provisions of any future federal internal revenue law, or any similar tax law of any state or jurisdiction, each Partner's distributive share of all items of income, gain, loss, deduction, credit or allowance in respect of any such Disposition shall be made and based upon such Partner's basis in such capital asset.

Copyright 1998 Steven M. Sack

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