B2B | Small Business

What Is a 50/50 Partnership Agreement?

Author: Kenneth Hamlett
Publish Date: 
Under a 50/50 partnership agreement each partner shares equally in any profit or loss generated from the business. In addition, each partner has an equal voice in managing the business. Many times the parties entering into a 50/50 partnership contribute different resources to the business. In some cases one partner might have the business skills necessary to manage the business while the other partner has the financial capital required to finance the business. These parties enter into a 50/50 partnership agreement based on these contributions.

Major terms to include in a 50/50 partnership agreement include the name of the partnership, specific contributions by each partner to the partnership, each partner’s authority to bind the partnership to debt or contracts, specific duties of each partner, how to resolve disputes and how decisions get made. Each term does not require an equal split between partners. For example, one partner can provide 100 percent of the credit line for the partnership while the other partner provides 100 percent of the real estate required. Despite the various contribution percentages each partner shares 50/50 in any profit and loss.

The buy/sell portion of a 50/50 partnership agreement serves a very important function. This part of the agreement dictates the terms and conditions set forth in the event of a buyout, death, divorce, resignation or retirement of one of the partners. Without this portion of the 50/50 partnership agreement the partnership gets dissolved according to the Uniform Partnership Act and various state laws. This part of the agreement ensures the partners’ business continues as originally designed.

Special allocations refer to disproportionate distributions of profits or losses written into a 50/50 partnership agreement. An example of a special allocation is giving one 50/50 partner 70 percent of the company’s profits while giving the other 50/50 partner 30 percent of the profit.

The 50/50 partnerships have a number of pitfalls to consider. Often one party contributes an unequal share of time, money, credit, assets or other resources required to run the business. In addition, vital business decisions often get delayed when partners fail to reach an agreement. Partners in a 50/50 partnership often reduce their ownership percentage to 49 percent each and give the 2 percent to a third trusted party. This third party has the deciding vote when the two majority partners cannot reach a decision. The law has remedies for 50/50 partnerships that cannot reach a material agreement and the business comes to a standstill. When this happens the court steps in and liquidates the assets of the business.

Browser Compatibility: This website works well on IE8, Mozilla Firefox 3.x.x and Google Chrome 6.0.XXX
FREELY Download the latest version of browsers here: Download IE8 | Download Mozilla Firefox | Download Google Chrome