Updated 2 October 2018 -
Sample Partnership Agreement
Here is a sample Partnership agreement for a typical
Investment Club. Modify it to fit your new club's needs. [Download
MS Word document.]
This AGREEMENT of PARTNERSHIP,
effective as of _____BEGINNING DATE____ (Beginning Date), by and
between the undersigned, to wit:
[Insert Names Here]
NOW, THEREFORE IT IS AGREED:
- Formation. The undersigned hereby form a General
Partnership in accordance with and subject to the laws of the State of
- Name. The name of the Partnership shall be ____NAME
- Term. The Partnership shall begin on Beginning Date
and shall continue until December 31 of the same year and thereafter
from year to year unless earlier terminated as hereinafter provided.
- Purpose. The only purpose of the Partnership is to
invest the assets of the Partnership solely in stocks, bonds, and other
securities ("securities") for the education and benefit of the Partners.
- Meetings. Periodic meetings shall be held as
determined by the Partnership.
- Capital Contributions. The Partners may make capital
contributions to the Partnership on the date of each periodic meeting in
such amounts as the Partnership shall determine, provided, however, that
no Partner's capital account shall exceed twenty-five percent (25%) of
the capital accounts of all Partners.
- Value of the Partnership. The current value of the
assets of the Partnership, less the current value of the liabilities of
the Partnership, (hereinafter referred to as the "value of the
Partnership") shall be determined as of a regularly scheduled date and
time ("valuation date") preceding the date of each periodic meeting
determined by the Club.
- Capital Accounts. A capital account shall be
maintained in the name of each Partner. Any increase or decrease in the
value of the Partnership on any valuation date shall be credited or
debited, respectively, to each Partner's capital account on that date.
Any other method of valuating each Partner's capital account may be
substituted for this method, provided the substituted method results in
exactly the same valuation as previously provided herein. Each Partner's
contribution to, or capital withdrawal from, the Partnership shall be
credited, or debited, respectively, to that Partner's capital account.
- Management. Each Partner shall participate in the
management and conduct of the affairs of the Partnership in proportion
to his capital account. Except as otherwise determined, all decisions
shall be made by the Partners whose capital accounts total a majority of
the value of the capital accounts of all the Partners.
- Sharing of Profits and Losses. Net profits and losses
of the Partnership shall inure to, and be borne by, the Partners, in
proportion to the value of each of their capital accounts.
- Books of Account. Books of account of the
transactions of the Partnership shall be kept and at all times be
available and open to inspection and examination by any Partner.
- Annual Accounting. Each calendar year, a full and
complete account of the condition of the Partnership shall be made to
- Bank Account. The Partnership may select a bank for
the purpose of opening a bank account. Funds in the bank account shall
be withdrawn by checks signed by any Partner designated by the
- Brokerage Account. None of the Partners of this
Partnership shall be a broker. However, the Partnership may select a
brokerage and enter into such agreements with the brokerage as required
for the purchase or sale of securities. Securities owned by the
Partnership shall be registered in the Partnership name unless another
name shall be designated by the Partnership.
Any corporation or transfer agent called upon to
transfer any securities to or from the name of the Partnership shall be
entitled to rely on instructions or assignments signed by any Partner
without inquiry as to the authority of the person(s) signing such
instructions or assignments, or as to the validity of any transfer to or
from the name of the Partnership.
At the time of a transfer of securities, the
corporation or transfer agent is entitled to assume (1) that the
Partnership is still in existence and (2) that this Agreement is in full
force and effect and has not been amended unless the corporation has
received written notice to the contrary.
- No Compensation. No Partner shall be compensated for
services rendered to the Partnership, except reimbursement for expenses.
- Additional Partners. Additional Partners may be
admitted after the first six months of operation, upon the unanimous
consent of the Partners, so long as the number of Partners does not
exceed twenty-five (25).
(b) Removal of a Partner. Any
Partner may be removed by agreement of the Partners whose capital
accounts total a majority of the value of all Partners' capital
accounts. Written notice of a meeting where removal of a Partner is to
be considered shall include a specific reference to this matter. The
removal shall become effective upon payment of the value of the
removed Partner's capital account, which shall be in accordance with
the provisions on full withdrawal of a Partner noted in paragraphs 18
and 20. The vote action shall be treated as receipt of request for
- Termination of Partnership. The Partnership may be
terminated by agreement of the Partners whose capital accounts total a
majority in value of the capital accounts of all the Partners. Written
notice of a meeting where termination of the Partnership is to be
considered shall include a specific reference to this matter. The
Partnership shall terminate upon a majority vote of all Partners'
capital accounts. Written notice of the decision to terminate the
Partnership shall be given to all the Partners. Payment shall then be
made of all the liabilities of the Partnership and a final distribution
of the remaining assets either in cash or in kind, shall promptly be
made to the Partners or their personal representatives in proportion to
each Partner's capital account.
- Voluntary Withdrawal (Partial or Full) of a Partner.
Any Partner may withdraw a part or all of the value of his capital
account in the Partnership and the Partnership shall thereafter continue
as a taxable entity.
The Partner withdrawing a part or all of the value of
his capital account shall give notice of such intention in writing to
the Secretary. Written notice shall be deemed to be received as of the
first meeting of the Partnership at which it is presented. If written
notice is received between meetings it will be treated as received at
the first following meeting. Withdrawal may only take place after the
first six months of Partnership operation.
In making payment, the value of the Partnership as set
forth in the valuation statement prepared for the first meeting
following the meeting at which notice is received from a Partner
requesting a partial or full withdrawal, will be used to determine the
value of the Partner's account.
The Partnership shall pay the Partner who is
withdrawing a portion or all of the value of his capital account in the
Partnership in accordance with Paragraph 20 of this Agreement.
- Death or Incapacity of a Partner. In the event of the
death or incapacity of a Partner, receipt of notice shall be
treated as a notice of full withdrawal.
- Terms of Payment. In the case of a partial
withdrawal, payment may be made in cash or securities of the Partnership
or a mix of each at the option of the Partnership. In the case of a full
withdrawal, payment may be made in cash or securities or a mix of each
at the option of the remaining Partners. In either case, where
securities are to be distributed, the remaining Partners select the
The Partnership shall transfer to the Partner (or other
appropriate entity) withdrawing a portion or all of his interest in the
Partnership, an amount equal to the value of the capital account being
withdrawn, less any actual expenses to the Partnership related to the
withdrawal. Payment may be made by transferring cash or securities or
both. The value of securities transferred shall be as shown on the
Club's valuation statement prepared to determine the value of that
Partner's capital account in the Partnership and securities shall be
transferred as of the date of that valuation statement (the "withdrawal
valuation date"). The Club's broker shall be advised that ownership of
the securities has been transferred to the Partner as of the withdrawal
valuation date. Cash shall be paid within 10 business days after the
withdrawal valuation date.
If the Partner withdrawing a portion or all of the
value of his capital account in the Partnership desires an immediate
payment in cash, the Partnership at its earliest convenience may pay
eighty percent (80%) of the estimated value of his capital account and
settle the balance in accordance with the valuation and payment
procedures set forth in items 18 and 20.
- Forbidden Acts. No Partner shall:
(a) Have the right or authority to bind or obligate the
Partnership to any extent whatsoever with regard to any matter outside
the scope of the Partnership purpose.
(b) Except as provided in paragraph 16A, without the
unanimous consent of all the other Partners, assign, transfer, pledge,
mortgage or sell all or part of his interest in the Partnership to any
other Partner or other person whomsoever, or enter into any agreement as
the result of which any person or persons not a Partner shall become
interested with him in the Partnership.
(c) Purchase an investment for the Partnership where
less than the full purchase price is paid for same.
(d) Use the Partnership name, credit or property for
other than Partnership purposes.
(e) Do any act detrimental to the interests of the
Partnership or which would make it impossible to carry on the business
or affairs of the Partnership.
This Agreement of Partnership shall be binding upon the
respective heirs, executors, administrators and personal representatives
of the Partners.
- 26 US Code Sections 6221-6223 designation and election.
The Partnership's Treasurer/Financial Partner shall be the designated
Partnership Representative (PR) for purposes of 26 USC Section 6223 and shall
responsible for dealing with the IRS in the event of an audit. Unless
otherwise directed by the Partners, the PR shall annually, in connection
with filing the Partnership's IRS Form 1065 tax return, indicate the
Partnership elects to be treated under 26 USC subsection 6221(b)(1)(a), that
is, an election out of the audit rules of 26 USC Section 6221. The Treasurer
shall include with such election any required information to make such
election effective. In the event of an IRS audit, the PR will represent
the Partnership but is not authorized to make any settlement agreement
without the three-quarters majority consent of the current Partners.
Partners shall consist only of individuals; no trust may be a Partner.
The Partners have caused this Agreement of Partnership to
be executed on the dates indicated below, effective as of the date
SIGN AND DATE HERE
[All Partners sign below.]
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