A partnership agreement is a written document detailing the terms and conditions of a business relationship between partners. The agreement explicitly states the partners’ individual duties, obligations, and contributions to the Illinois partnership. Ideally the agreement should cover all possible situations that the partnership could face during the partnership’s lifespan. Because of this, partnership agreements are oftentimes complex and legal counsel is highly recommended in drafting, negotiating, and reviewing a finalized version of the partnership agreement.
An important function of the partnership agreement, besides outlining the partners’ rights and responsibilities in the partnership, is that it provides for the dissociation of partners and dissolution of the partnership. These provisions determine, among other things, how members are to be expelled from the partnership and how assets and debts of the partnership are distributed. If there is no partnership agreement, Illinois State law and guidelines found in the Illinois Uniform Partnership Act will govern dissolution. The Partnership Act rules are broad, and the imposition of these statutory rules on the partners and the partnership is often problematic and undesirable.