Do I need a written partnership agreement?

Not strictly — a partnership can exist without any written document where two or more people carry on business in common with a view to profit. However, without a written agreement the default rules in the relevant Partnership Act apply, and disputes over profit shares, management, and exit can become expensive and disruptive. A written agreement is strongly recommended.

Is a partnership a separate legal entity?

No. A partnership is not a separate legal person at common law. The partners hold partnership property jointly and are personally liable for partnership obligations. The partnership can, however, register a business name and hold an ABN.

How are partnership profits taxed?

Partnership income flows through to the partners, who pay income tax on their share at their individual marginal rates. The partnership itself does not pay income tax but must lodge an annual partnership return with the ATO.

Can partners have different profit shares?

Yes. Profit sharing can be equal or weighted by capital contribution, role, or any other agreed basis. In the absence of an agreement, section 24 of the Partnership Act 1892 (NSW) (and equivalents) presumes equal sharing.

What happens if a partner leaves?

Unless the agreement provides otherwise, the partnership is technically dissolved on the departure of any partner. A well-drafted agreement will provide for the continuation of the partnership and a buy-out of the departing partner's interest at an agreed valuation.

Are partners liable for each other's mistakes?

Yes. Partners are jointly and severally liable for wrongful acts done by any partner in the ordinary course of the firm's business. This is why trust, due diligence, and clear management rules are critical.

Can I convert a partnership to a company later?

Yes. Many businesses start as partnerships and later incorporate under the Corporations Act 2001 (Cth). The conversion involves transferring partnership assets and liabilities to a new company, and specific tax rollovers may be available under the Income Tax Assessment Act 1997 (Cth).

What is a limited partnership?

A limited partnership, registered under state legislation such as the Partnership Act 1892 (NSW) Part 3, includes at least one general partner with unlimited liability and one or more limited partners whose liability is capped at their contribution. It is mainly used for venture capital structures.

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Partnership Agreement Template

A partnership agreement governs the relationship between two or more partners carrying on a business in common with a view to profit. Use our free Australian template to set out capital contributions, profit sharing, management rights, and exit mechanisms, tailored to your state's Partnership Act.

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PARTNERSHIP AGREEMENT

State Of New South Wales, Australia

PARTNER 1

Sarah J. Mitchell

Level 8, 1 Chifley Square, Sydney NSW 2000 · ABN 12 345 678 901

PARTNER 2

James T. O'Brien

200 Collins Street, Melbourne VIC 3000 · ABN 55 123 456 789

Mitchell O'Brien Consulting

Effective: 25 April 2026 – Ongoing

This Partnership Agreement (this "Agreement") is entered into as of 25 April 2026 by and between Sarah J. Mitchell ("Partner 1") and James T. O'Brien ("Partner 2"), collectively the "Partners", to form and operate a general partnership under the business name Mitchell O'Brien Consulting (the "Partnership"), governed by the laws of the State of New South Wales and the Partnership Act 1892 (NSW).

PARTNERSHIP NAME, REGISTRATION AND PURPOSE

The Partnership shall be conducted under the business name Mitchell O'Brien Consulting. The Partners shall register the business name with the Australian Securities and Investments Commission (ASIC) and/or the relevant state business names registry as required by the Business Names Registration Act 2011 (Cth). The principal place of business shall be located at Level 8, 1 Chifley Square, Sydney NSW 2000. The purpose of the Partnership is: To carry on the business of management consulting, strategy advisory, and related professional services. The Partnership shall not engage in any business other than the agreed purpose without the written consent of all Partners.

TERM

The Partnership shall commence on 25 April 2026 and continue for an indefinite period until dissolved in accordance with this Agreement or as required by the Partnership Act 1892 (NSW).

CAPITAL CONTRIBUTIONS

Each Partner shall contribute the following initial capital to the Partnership: Partner 1 shall contribute 75,000.00 AUD; Partner 2 shall contribute 75,000.00 AUD. Additional capital contributions may only be made upon the unanimous written consent of all Partners. No Partner shall withdraw any portion of their capital contribution without the prior written consent of all other Partners. Each Partner's capital account shall be maintained in the Partnership accounts and adjusted annually.

PROFIT AND LOSS ALLOCATION

Net profits and net losses of the Partnership shall be allocated among the Partners as follows: Partner 1 shall receive 50%; Partner 2 shall receive 50%. Distributions of profits shall be made at such times and in such amounts as the Partners unanimously agree, but no less frequently than annually. The Partnership financial year shall end on 30 June. No distribution shall be made that would render the Partnership unable to satisfy its liabilities as they become due. Partnership income and losses shall be allocated to each Partner's individual tax return in accordance with their respective profit-sharing percentage, as required by the Income Tax Assessment Act 1997 (Cth).

MANAGEMENT AND VOTING

The Partnership shall be managed jointly by all Partners with equal authority. Each Partner shall have the right to participate in the day-to-day management of the Partnership business. The Partners agree to the following division of responsibilities: Partner 1: Client acquisition, business development, strategy. Partner 2: Operations, finance, technology delivery. All major decisions — including incurring debt exceeding 10,000.00 AUD, acquiring or disposing of Partnership assets, admitting new partners, entering into contracts for a term exceeding one year, or amending this Agreement — shall require the unanimous written consent of all Partners.

BANKING AND ACCOUNTS

The Partnership shall maintain one or more business bank accounts at Commonwealth Bank of Australia. All Partnership funds shall be deposited in those accounts and shall not be commingled with the personal funds of any Partner. Cheques and electronic transfers above 5,000.00 AUD shall require the signature or electronic authorisation of at least two Partners. The Partnership shall maintain accurate books and records in accordance with Australian Accounting Standards and the requirements of the Australian Taxation Office (ATO). Each Partner shall have full access to inspect and audit the Partnership records at any reasonable time upon reasonable notice.

DRAWINGS AND SALARIES

Partners may draw against their share of profits in equal monthly instalments drawn against the quarterly profit distribution. No Partner shall draw an amount in excess of their credited profit share without the written consent of all other Partners. Partner drawings shall be recorded in the Partnership books and reconciled against each Partner's capital account at the end of each financial year. Partners are not entitled to salaries or remuneration from the Partnership unless specifically agreed in writing by all Partners.

NEW PARTNERS

A new partner may be admitted to the Partnership only upon the unanimous written consent of all existing Partners. Upon admission, the new partner shall execute a deed of accession to this Agreement and shall contribute such capital as the existing Partners determine. The admission of a new partner shall not dissolve the Partnership.

DEATH, INCAPACITY AND WITHDRAWAL

(a) Voluntary Withdrawal: A Partner may voluntarily withdraw from the Partnership upon providing 60 days' written notice to the other Partners. (b) Death or Incapacity: Upon the death, incapacity, or bankruptcy of any Partner, the remaining Partners shall have the right, exercisable by written notice within sixty (60) days, to continue the Partnership and to purchase the deceased or incapacitated Partner's interest at fair market value. If the remaining Partners elect not to continue, the Partnership shall be wound up and dissolved in accordance with the Partnership Act 1892 (NSW). (c) Buyout: Payment for any buyout under this clause shall be made within ninety (90) days of the valuation date, or on such other terms as the parties may agree in writing.

10.

DISSOLUTION AND WINDING UP

The Partnership shall be dissolved upon: (a) the unanimous written agreement of all Partners to dissolve; (b) the expiration of the Partnership term, if any; (c) the death, incapacity, or bankruptcy of any Partner, subject to clause 9 above; (d) a court order under the Partnership Act 1892 (NSW); or (e) any event that makes it unlawful for the Partnership to continue. Upon dissolution, the Partnership assets shall be applied in the following order: first, to discharge all Partnership debts and liabilities (including amounts owing to third-party creditors); second, to repay each Partner's capital contribution; and third, to distribute any surplus to the Partners in accordance with their profit-sharing percentages. The Partners shall co-operate to wind up the affairs of the Partnership expeditiously and in good faith.

11.

NON-COMPETITION

For a period of 1 year following a Partner's withdrawal or the dissolution of the Partnership, the departing Partner shall not, directly or indirectly, engage in, own, manage, operate, consult for, or have any material interest in any business that is substantially similar to and in direct competition with the Partnership within the geographic area where the Partnership conducts business. Australian courts assess post-departure restraint clauses by reference to the legitimate interests they protect, their duration, and their geographic scope. If any court determines this restriction to be unenforceable, it shall be modified to the minimum extent necessary to make it enforceable, having regard to the Competition and Consumer Act 2010 (Cth) and applicable state law.

12.

INSURANCE

The Partnership shall maintain, at Partnership expense, the following insurances throughout the term of this Agreement: (a) public liability insurance with a minimum cover of 10,000,000.00 AUD; (b) professional indemnity insurance appropriate to the nature of the Partnership's business; and (c) key person / partnership life insurance on each Partner in an amount sufficient to fund the buyout of a deceased Partner's interest under clause 9 above, unless the Partners unanimously agree otherwise in writing. Evidence of current insurance coverage shall be provided to any Partner upon request.

13.

DISPUTE RESOLUTION

Any dispute arising out of or relating to this Agreement shall first be submitted to mediation in the State of New South Wales before a mutually agreed mediator (or, failing agreement, a mediator appointed by the Resolution Institute of Australia). If mediation does not resolve the dispute within forty-five (45) days, the dispute shall be finally resolved by binding arbitration under the rules of the Australian Centre for International Commercial Arbitration (ACICA) in New South Wales, by a single arbitrator. The decision of the arbitrator shall be final and binding.

14.

GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of New South Wales and, where applicable, the laws of the Commonwealth of Australia, including the Partnership Act 1892 (NSW). Any dispute not otherwise resolved shall be determined exclusively in the courts of the State of New South Wales, and each Partner submits to the jurisdiction of those courts.

15.

GENERAL PROVISIONS

Entire Agreement: This Agreement constitutes the entire agreement among the Partners with respect to the subject matter hereof and supersedes all prior discussions, negotiations, and agreements. Amendment: This Agreement may only be amended by written instrument signed by all Partners. Severability: If any provision is found invalid or unenforceable, the remaining provisions shall continue in full force and effect. Notices: All notices required under this Agreement shall be in writing and delivered personally, by registered post, or by email to the addresses set out herein. Electronic Execution: This Agreement may be executed in counterparts, including electronic counterparts, which are valid and binding under the Electronic Transactions Act 1999 (Cth) and applicable state legislation.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date first written above.

PARTNER 1

Sarah J. Mitchell

Date: ____________________

PARTNER 2

James T. O'Brien

Date: ____________________

What Is a Partnership Agreement?

A partnership agreement is a written contract between two or more persons who agree to carry on a business together with a view to profit. It sets out the capital each partner contributes, how profits and losses are shared, how management decisions are made, each partner's fiduciary duties, and the mechanisms for admitting new partners, buying out departing partners, and dissolving the partnership.

Under Australian law, partnerships are governed primarily by state legislation — the Partnership Act 1892 (NSW), Partnership Act 1958 (Vic), Partnership Act 1891 (Qld), Partnership Act 1895 (WA), Partnership Act 1891 (SA), Partnership Act 1891 (Tas), Partnership Act 1997 (NT), and Partnership Act 1963 (ACT). These Acts codify the essential features of partnership and apply default rules where the partners have not agreed otherwise. A written agreement displaces the default rules with tailored terms.

Australian partnerships are a flexible structure but carry unlimited joint and several liability — each partner is personally liable for partnership debts and the wrongful acts of other partners in the ordinary course of the business. Limited partnerships (registered under Australian state Limited Partnerships legislation) and incorporated limited partnerships are available for venture capital structures. Partnerships must register for an ABN with the Australian Business Register and, if turnover exceeds $75,000, for GST under the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

What's Covered in This Template

Our partnership agreement covers all the essential matters for a general partnership under Australian law.

Partner Details

Legal names, ABNs, and addresses of all partners.

Partnership Name and Business

Registered business name and description of the business activities.

Capital Contributions

Initial and future capital contributions by each partner.

Profit and Loss Sharing

Percentage split of profits and losses, which need not be equal.

Management and Decision-Making

Day-to-day management rights and matters requiring unanimous or majority approval.

Partner Remuneration

Salaries, drawings, and interest on capital accounts.

Books and Accounts

Record-keeping obligations and financial year end.

Admission of New Partners

Procedure and approval threshold for admitting new partners.

Exit and Buy-Out

Retirement, death, incapacity, and buy-out valuation methodology.

Dissolution

Events of dissolution and winding-up procedure.

Fiduciary Duties

Duties of good faith, disclosure, and avoiding conflicts of interest.

Dispute Resolution

Mediation and arbitration clauses under the state Commercial Arbitration Acts.

How to Create a Partnership Agreement

Follow these steps to produce a tailored partnership agreement in minutes.

1
Enter Partner Details
Provide legal names, ABNs, and addresses of all partners and the registered business name.
2
Set Capital and Profit Shares
Specify initial capital contributions, future funding obligations, and profit/loss sharing ratios.
3
Define Management Rights
Identify decisions requiring unanimous consent and those decided by majority.
4
Configure Exit and Dissolution
Set out buy-out procedures, valuation method, and events of dissolution.
5
Review and Download
Check governing state, fiduciary duties, and dispute resolution, then download the PDF.

Legal Considerations

Partnerships are governed by state Partnership Acts and deeply rooted common law principles.

This template is for informational purposes only and does not constitute legal, tax, or accounting advice. Consult a qualified practitioner before forming a partnership.

Reviewed for Australian law

Joint and Several Liability

Under section 9 of the Partnership Act 1892 (NSW) and equivalent provisions in other Australian states, every partner is jointly liable with the other partners for all debts and obligations of the firm incurred while they are a partner. Partners are also jointly and severally liable for wrongful acts or omissions of any partner acting in the ordinary course of the firm's business. This unlimited liability is the defining feature — and principal risk — of a general partnership in Australia.

Fiduciary Duties between Partners

In Australia, partners owe fiduciary duties to one another, including duties of good faith, loyalty, and to account for any benefit derived from the partnership business. These duties are codified in sections 28 to 30 of the Partnership Act 1892 (NSW) and parallel provisions across Australian jurisdictions. The agreement cannot wholly exclude these duties, but it can specify how they apply.

Dissolution by Notice

Unless the agreement provides otherwise, a partnership at will can be dissolved by any partner giving notice to the other partners under section 32 of the Partnership Act 1892 (NSW). A fixed-term partnership continues until expiry. The agreement should set out orderly exit and winding-up processes to avoid sudden, disruptive dissolutions.

Taxation of Partnerships

A partnership is not a separate taxpayer. Under Division 5 of the Income Tax Assessment Act 1936 (Cth), the partnership lodges a return but income and losses flow through to the partners, who are taxed individually. The partnership must register for its own ABN and TFN, and for GST if turnover exceeds $75,000.

Frequently Asked Questions

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