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Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Having an LLC (Limited Liability Company) Partnership agreement in place is a necessity for any business. It’s an invaluable document that provides protection from personal liability, helps to prevent misunderstandings and disputes, and can provide substantial tax savings. At ��������Ƶ, the world’s largest open source legal template library, we understand the importance of having a high-quality LLC partnership agreement and have developed a step-by-step guide to help you draft one yourself.

With millions of data points informing ��������Ƶ’s artificial intelligence as to what a market standard LLC partnership agreement looks like, anyone can draft and customize these legal documents without paying costly lawyer fees. Not only are our templates convenient but they are also designed with your needs in mind - allowing you to spend less time worrying about paperwork and more time running your business.

An LLC partnership agreement should outline the rights and obligations of each partner in addition to their respective interests in the company. It should also clarify each partner’s roles and responsibilities within the company as well as defining the process for making decisions and resolving disputes. The agreement should also include provisions for profit/loss distribution and ownership interest allocation; this ensures all parties are on board with how profits will be specificially divided up within the company.

Although having an LLC partnership Agreement is advantageous for any business it is especially important when it comes to protecting both partners from personal liability - in event that something goes wrong with the business or if it is sued, this ensures that each partner’s personal assets remain safe from harm or seizure whilst at no point violating local laws or regulations. In addition these agreements often allow businesses take advantage of various tax incentives available so they can make sure their money remains where it belongs - with them!

Here at ��������Ƶ we want businesses everywhere to be able secure themselves legally without taking out huge loans or paying expensive lawyer fees so if you want more information on how you can benefit from our free template library then read on below!

Definitions

LLC Partnership Agreement: A legally binding contract between two or more people who wish to form a business together. It outlines the rights and responsibilities of the partners, including how they will manage the business, divide profits, and resolve any disputes.

Voting Rights: The rights of each partner to make decisions in a business, based on a majority or consensus vote.

Dispute Resolution Process: A system of rules and procedures for resolving disagreements between partners in a business.

Consensus: An agreement among all parties in a business on a particular decision or issue.

Dissolution: The termination of a business, partnership, or other legal entity.

Filing Status: The way a business or other legal entity is registered with a government agency for tax and legal purposes.

Tax Responsibilities: The duties of each partner in a business to file taxes, pay estimated taxes, and report any income or losses.

Tax Benefits: Deductions or credits that reduce the tax burden of a business or other legal entity.

Amendment: A change to an existing legal document or agreement.

Renegotiation: A process in which two or more parties renegotiate the terms of a legal agreement.

Contents

1. The Definition of an LLC Partnership Agreement
2. How to Choose the Right Members for an LLC Partnership
3. Research potential members
4. Consider different skill sets
5. Consider different contributions and investments
6. Drafting the Agreement
7. Identify the purpose of the LLC
8. Determine the rights and responsibilities of each partner
9. Include management structure, voting rights, and dispute resolution process
10. Include how profits and losses will be allocated
11. Legal Issues to Consider
12. Determine the state where the agreement will be filed
13. Ensure all parties comply with local laws
14. Consider any necessary licenses and permits
15. Consider any necessary insurance
16. Structuring the Agreement
17. Determine the relationship between the members
18. Establish the rules and regulations for the partnership
19. Decide how decisions will be made
20. Outline the rights and responsibilities of each partner
21. Outline the termination process
22. Tax Implications
23. Determine the filing status of the LLC
24. Determine the tax responsibilities of each member
25. Determine the taxes that need to be paid
26. Consider any relevant tax benefits
27. Filing and Registering the Agreement
28. Research the filing requirements of the state
29. Gather the necessary documents and paperwork
30. Submit the agreement for approval
31. Obtain an LLC Certificate of Formation
32. Renegotiating or Terminating the Agreement
33. Consider the reasons for changing the agreement
34. Determine the best way to make changes to the agreement
35. Outline the necessary steps to terminate the agreement
36. Protecting Your Interests
37. Consider the risks of entering into the agreement
38. Outline the necessary steps to protect your interests
39. Consider any relevant insurance policies
40. Conclusion
41. Review the agreement to ensure all parties are in agreement
42. Sign and date the agreement
43. File the agreement with the necessary government agencies

Get started

The Definition of an LLC Partnership Agreement

• Understand what an LLC partnership agreement is and why it’s important: an LLC partnership agreement sets out the terms and conditions of the business relationship between two or more partners, and sets out the rights and responsibilities of each partner
• Draft the agreement with the help of a lawyer or legal counsel
• Outline the roles, responsibilities, and management of the business
• Determine the percentage of ownership of each partner, and their rights in the event of dissolution
• Address any additional provisions, such as dispute resolution or additional contributions
• Finalize the agreement by having all partners sign
• Once all partners have signed, the LLC partnership agreement is legally binding
• Keep a copy of the agreement for your records
• Check off this step and move on to the next step: How to Choose the Right Members for an LLC Partnership

How to Choose the Right Members for an LLC Partnership

• Review the qualifications and experience of each potential member to ensure they have the skills and resources necessary to contribute to the LLC
• Have an honest discussion with each potential member to ensure they understand the expectations of being part of the LLC, such as financial or time commitments, and to make sure they are willing to commit
• Research the background of each potential member to ensure they have a good reputation and that their values align with those of the LLC
• Make a final selection of members based on the qualifications, experience, and willingness and ability to commit to the LLC
• Once you’ve chosen the right members, you can check this step off your list and move on to the next step of researching potential members.

Research potential members

• Check references of potential members
• Make sure potential members have the required skill sets
• Ensure potential members have the same vision as you for the LLC
• Conduct interviews with potential members to get a better understanding of their commitment to the LLC
• Verify potential members have the financial means to invest in the LLC

When you can check this off your list and move on to the next step:

• Once you’ve conducted thorough research on potential members and are satisfied with their skill sets, commitment, and financial means, you can move on to the next step.

Consider different skill sets

• Brainstorm the different skills that each potential partner can bring to the LLC
• Identify the skills that are most important for the LLC to have
• Assess how each potential partner will contribute to the LLC based on their skill set
• Make sure that each partner’s skills are complementary
• Discuss any potential conflicts or overlaps in skills
• When you have identified the skill sets that each partner will bring to the LLC, you can move on to the next step of considering different contributions and investments.

Consider different contributions and investments

• Identify the contributions that each partner will make to the business, such as money, property, services, or a combination of all three.
• Specify the investments each party is making into the business, including the amount each partner is investing and the percentages of ownership each partner will receive.
• Consider the different roles each partner will have in the business, such as a manager or an owner.
• Make sure each contribution and investment is documented in the agreement.

You can check off this step when you have identified the contributions and investments each partner is making, and you have documented this in the agreement.

Drafting the Agreement

• Gather the information from the previous step and assemble it into an agreement
• Determine what type of agreement you need (operating agreement or partnership agreement)
• Outline the LLC structure and ownership
• Include information on capital contributions and voting rights
• Note the management structure and duties of the members
• Describe the procedure for admitting new members
• Specify how profits and losses will be distributed
• Include any other relevant information
• Have the agreement reviewed and signed by all members

You’ll know that you’ve completed this step when you have a signed agreement that outlines the LLC structure and ownership, management structure, voting rights, capital contributions, and any other relevant information.

Identify the purpose of the LLC

• Research the type of LLC you want to form and the goals of the business
• Determine why you are entering into a partnership and what you and your partners want to achieve
• Draft a mission statement that describes the purpose of the LLC
• Decide what type of business structure works best for you and your partners
• When you have a clear understanding of the purpose of your LLC and the rights and responsibilities of each partner, you can check this step off your list and move on to the next step.

Determine the rights and responsibilities of each partner

• Brainstorm the roles each partner will play within the LLC
• Decide on a capital contribution each partner will make
• Decide who will manage day-to-day operations
• Decide who will be responsible for major decisions and share control
• Outline the special rights and responsibilities each partner will have (if applicable)
• Decide how profits and losses will be split
• Identify the duties each partner will be responsible for
• Outline the restrictions on each partner’s authority

You’ll know you are finished with this step when you have identified and listed each partner’s rights and responsibilities within the LLC.

Include management structure, voting rights, and dispute resolution process

• Decide who will manage the LLC and how decisions will be made
• Describe how each partner will contribute to the LLC
• Lay out how voting rights will be distributed among the partners
• Specify how disputes among the partners will be handled
• Outline the process for adding new partners to the LLC
• When you have determined the management structure, voting rights, and dispute resolution process, you can move on to the next step.

Include how profits and losses will be allocated

• Establish who will be the managing partner and who will be the partner, if applicable
• Decide how the profits and losses of the business will be allocated
• Outline the contribution of each partner, if applicable
• Specify how any capital contributions will be repaid
• Include provisions for how to handle withdrawals or investments by the partners
• Include a clause dictating how to handle the death of a partner
• When you’ve made decisions on how profits and losses will be allocated, include them in the LLC partnership agreement and make sure all partners sign it.

Legal Issues to Consider

• Consider the legal ramifications of forming a partnership, including tax implications, legal obligations, and liabilities
• Research local state laws to ensure the agreement is legally binding
• Determine if a non-compete or non-disclosure agreement is necessary
• Make sure that the agreement is clear and enforceable
• When you are finished, you will have an understanding of the legal obligations of the parties and the agreement will be compliant with all applicable laws.

Determine the state where the agreement will be filed

• Research the laws in the state or states that the LLC will operate in
• Consult with a lawyer familiar with the laws in your state to make sure all parties’ rights and responsibilities are protected
• Determine the state where the agreement will be filed and make sure to meet the requirements of that state
• When you have determined which state to file the agreement in, you can check this step off your list and move on to ensuring all parties comply with local laws.

Ensure all parties comply with local laws

• Research the local laws for the state in which the LLC Partnership Agreement will be filed.
• Make sure that all parties involved in the agreement are compliant with all applicable laws in the state.
• Consult a lawyer to advise on any specific legal requirements that must be met.
• Once you have researched all of the local laws and consulted a lawyer, you can check this step off your list and move on to the next step.

Consider any necessary licenses and permits

• Determine if any licenses or permits are required for the business activities of the LLC
• Research the requirements of the licenses and permits needed
• Contact the local government office to confirm the application process
• Gather all the necessary documents and submit the application for the licenses and permits
• Wait for approval of the license and permit
• When approval is received, you can check this off your list and move on to the next step.

Consider any necessary insurance

• Determine what type of insurance is required for your LLC partnership, such as liability insurance, business insurance, or professional indemnity insurance
• Research the different insurance policies available for LLCs and the costs associated with them
• Compare the policies and decide which one best suits your LLC partnership’s needs
• Once you have decided on the best policy for your LLC, purchase the policy and make sure to keep all records of the insurance policy
• Check off this step from your list and move onto the next step of structuring the agreement

Structuring the Agreement

• Review the specific legal requirements and guidelines of the state you are forming the LLC in
• Establish the rights and obligations of the members, including how decisions will be made and profits and losses will be allocated
• Decide on the management and voting structure of the LLC
• Determine the percentage of ownership of each member
• Draft a document outlining the agreement and have it reviewed by a lawyer

You can check this off your list when you have reviewed the specific legal requirements and guidelines of the state you are forming the LLC in, established the rights and obligations of the members, decided on the management and voting structure of the LLC, determined the percentage of ownership of each member, and drafted a document outlining the agreement and have it reviewed by a lawyer.

Determine the relationship between the members

• Review the LLC’s Articles of Organization to confirm the roles of the members
• Consult with a lawyer or other legal professional to understand the legal implications of the relationship between members
• Decide how members will be able to make decisions and how disputes will be resolved
• Establish rules and regulations for how profits and losses will be distributed among members
• Consider whether members should have any special rights or obligations
• Draft a written agreement outlining the relationship between the members

Once the agreement has been drafted, reviewed and signed by all members, the step is complete.

Establish the rules and regulations for the partnership

• Make a list of all the rules and regulations that should be included in the agreement
• Discuss the rules and regulations with the other members of the LLC
• Incorporate all of the rules and regulations into the LLC partnership agreement, and make sure the agreement is properly signed and witnessed
• When the agreement is signed and witnessed by all parties, you can move on to the next step.

Decide how decisions will be made

• Determine the voting structure for making decisions - will all partners have an equal vote or will one partner have a larger percentage?
• Agree on how to handle tie votes - will you need to take a vote again or will you have to make a unanimous decision?
• Specify how decisions are to be recorded - will minutes of meetings be taken or will voting be done via email?
• Decide if any decisions require the approval of all partners or if a majority vote will suffice
• When you have specified the voting structure and how decisions are to be made, you can check this off your list and move on to the next step.

Outline the rights and responsibilities of each partner

• List the roles and duties of each partner, such as who is responsible for managing the business, making decisions, and signing legal documents
• Identify what resources, such as money, equipment, or services will be provided by each partner
• Specify the ownership percentage of each partner
• Set expectations for how much each partner will be paid, if at all
• Detail how profits and losses will be distributed among partners
• Establish processes for resolving disputes
• When you have outlined each partner’s rights and responsibilities, you have completed this step and can move on to the next step.

Outline the termination process

• Establish the process for terminating the partnership, including how to handle any outstanding debt or assets
• Include a clause for dissolving the partnership in the event of a disagreement between partners
• Include a clause for how the partnership can be terminated if there is a death or disability of a partner
• Establish the process for deciding who will be the successor partner if one partner wishes to terminate the partnership
• Include a clause for how the partnership can be terminated if a court orders the dissolution
• Include a clause for how the remaining partner(s) can purchase the interest of the partner who wishes to terminate
• Include a clause for how the assets and liabilities of the partnership will be distributed in the event of a dissolution
• When you have outlined all the details of the termination process, you can check this off your list and move on to the next step.

Tax Implications

• Research tax implications for LLCs in your state
• Consult with a tax professional to ensure that you have the correct filing status and have taken advantage of all applicable deductions
• Make sure to include any tax-related information in the agreement, such as who will be responsible for filing taxes and who will be responsible for any tax liabilities
• Once you have determined the filing status of the LLC, you can move on to the next step.

Determine the filing status of the LLC

• Determine whether the LLC should be a partnership or a corporation
• Consult with an accountant or lawyer to determine the best filing status for the LLC
• Explore the pros and cons of each filing status and decide which one is best for the LLC
• File the appropriate form with the Secretary of State or local government
• Document the decision and filing status of the LLC in the partnership agreement
• When the filing status has been determined and the appropriate forms have been filed, this step is complete.

Determine the tax responsibilities of each member

• Research the federal and state tax laws that apply to the LLC and its members
• Decide who will be responsible for filing taxes, such as the individual members or the LLC itself
• Determine the tax deductions that each member can take
• Make sure to keep records of all the taxes paid

You can check this off your list and move onto the next step when you have concluded all research and made decisions on the tax responsibilities of each member.

Determine the taxes that need to be paid

• Research which taxes the LLC will be required to pay, both at the state and federal level
• Make sure to consult an accountant or other financial professional to ensure accuracy
• Consider whether the LLC will be taxed as a partnership, corporation, or other entity
• Decide if the members will be taxed individually or if the LLC will be taxed as a single entity

Once all the tax information has been gathered and researched, you will be able to check this step off your list and move onto the next step.

Consider any relevant tax benefits

• Review the tax benefits offered by forming an LLC
• Talk to your accountant or tax professional to learn more about the potential tax benefits
• Consider the tax implications of the LLC structure with your lawyer
• Research the IRS guidelines for LLCs and determine which benefits are applicable to your situation
• Decide if any of the tax benefits are beneficial to your specific LLC
• Once you have made a decision on the tax benefits you want to take advantage of, you can check off this step and move on to the next.

Filing and Registering the Agreement

• Visit the website of the Secretary of State’s office in the state in which the LLC will be registered
• Obtain the forms needed to file the LLC Partnership Agreement
• Complete the forms and submit them to the Secretary of State’s office with the appropriate filing fee
• Receive an acknowledgment of the filing and be sure to keep this on record
• You will know this step is complete once you receive an acknowledgment of the filing from the Secretary of State’s office.

Research the filing requirements of the state

• Review the state’s Secretary of State website to determine the business entity filing requirements.
• Make sure to pay attention to the state’s fee structure, filing procedures, and other requirements, such as the need to include a copy of the LLC Partnership Agreement.
• Research the state’s filing requirements to determine if you need to include any other documents with your LLC Partnership Agreement.
• Once you have reviewed the state’s filing requirements and you have all the necessary documents ready to be submitted, you can move on to the next step.

Gather the necessary documents and paperwork

• Collect all the necessary documents and paperwork, such as the articles of organization, business license, and certificates of authorization
• Gather any relevant documents from any third-party organizations, like banks and suppliers
• Collect information regarding the partnership and all its members, such as their personal information, contact information, and financial information
• Check that you have all the necessary documents, paperwork, and information needed to draft the LLC Partnership Agreement
• Once you have all the documents, paperwork, and information needed, you can move on to the next step of submitting the agreement for approval.

Submit the agreement for approval

• Prepare the partnership agreement for filing with the state.
• Submit the agreement to the secretary of state along with the necessary filing fee.
• Wait for the state to review and approve the agreement.
• Once the state has approved the agreement, you will receive confirmation and the LLC will be legally formed.

Obtain an LLC Certificate of Formation

• Research the laws that apply to your LLC in the state it is based in
• File the Certificate of Formation with the state’s Secretary of State office
• Pay the applicable filing fees
• Wait for the state to approve the Certificate of Formation
• Once the Certificate of Formation is approved, you will receive a copy of the document
• Check that the information on the approved Certificate of Formation is correct
• Once you have obtained an LLC Certificate of Formation, you can move on to the next step of drafting your LLC partnership agreement.

Renegotiating or Terminating the Agreement

• Consult the other partners in the LLC about any potential changes that need to be made to the agreement
• Determine why the agreement needs to be changed and how the changes should be implemented
• Draft a new version of the agreement that reflects the changes that were discussed with the other partners
• Present the new version to the other partners for review and discussion
• Make any necessary changes to the agreement based on the feedback and suggestions of the other partners
• Have each partner sign the updated version of the agreement
• File the updated agreement with the LLC’s governing state
• Once all partners have signed the updated agreement and it has been filed with the LLC’s governing state, you will have successfully renegotiated or terminated the agreement.

Consider the reasons for changing the agreement

• Identify what needs to be changed or updated in the existing LLC partnership agreement
• Consider the underlying reasons why the agreement needs to be changed, such as the addition of new partners, changes in the business structure, or modifications to the rights and responsibilities of the partners
• Determine how the changes will affect the existing agreement and the partners
• Consider any potential legal or financial implications of the changes
• Once you have reviewed the reasons for changing the agreement, you can move on to the next step in the process.

Determine the best way to make changes to the agreement

• Research the state laws that may apply to the agreement
• Consult with a lawyer to ensure you are following the best practices
• Determine the best method for communicating changes to the agreement, such as in person, through email, or through a meeting
• Draft a proposed amendment to the agreement outlining the changes
• Have all parties sign and date the amendment
• File the amendment with the appropriate state or local office
• Once all steps are completed, you can check this off your list and move on to the next step.

Outline the necessary steps to terminate the agreement

• Consult your state’s laws regarding LLC partnership agreements.
• Talk with your partner, or the other partners if there are more than two, to determine the terms of the agreement termination.
• Put the agreement termination terms in writing.
• Include details of the legal agreement that both parties must sign in order to confirm the termination of the LLC partnership.
• If there are multiple partners, make sure all parties sign the agreement before it is finalized.
• File the termination agreement with the state and keep a copy for your records.

How you’ll know when you can check this off your list and move on to the next step:

• You will know you have successfully completed this step when all parties have signed the termination agreement and it has been filed with the state.

Protecting Your Interests

• Consider including provisions that protect each partner’s interests in the event of a dispute
• For example, include a dispute resolution process such as mediation or arbitration
• Include clauses that protect each partner’s financial interests in the event of a dispute
• Consider addressing intellectual property rights, non-compete clauses, and other important issues
• Outline how profits and losses will be distributed
• Make sure the agreement is in compliance with all applicable laws
• When you have addressed all of these issues, you can check this step off your list and move on to the next step.

Consider the risks of entering into the agreement

• Research each partner’s individual risk factors, including financial stability, background, and credit score
• Consult a lawyer to understand potential risks you may face when entering into a partnership
• Identify any potential liabilities or risks associated with the business venture
• Consider how the partnership will be taxed and what the tax liabilities may be
• Review the agreement to make sure all risks are addressed and that you are adequately protected
• When you have reviewed all the risks associated with the agreement and have consulted with a lawyer, you can check this step off your list and move to the next.

Outline the necessary steps to protect your interests

• Research the laws in your state for forming a partnership agreement
• List the details of the partnership that both parties agree to, such as ownership shares, management responsibilities, and how profits will be divided
• Outline the terms of the partnership agreement, including the duration, how to dissolve the agreement, and other contingencies
• Have each party review and sign the partnership agreement
• File the agreement with your state or local government
• Have each party keep a copy of the signed agreement

Once you have completed these steps you can check off this item from your list and move on to the next step.

Consider any relevant insurance policies

• Research potential insurance policies for your LLC, such as general liability insurance, property insurance, or any other policies that may be relevant to your business.
• Contact insurance providers to compare policies and obtain quotes.
• Decide which insurance policies you want to purchase and include them in your partnership agreement.
• Make sure your insurance policies are up to date and provide sufficient coverage.
• When you have the necessary coverage outlined in your agreement, you can move onto the next step.

Conclusion

• Carefully review the entire agreement to make sure that all parties are in agreement.
• Make sure that all details, including ownership percentage, obligations, and responsibilities are included in the document.
• All parties should sign and date the agreement.
• Have all forms and documents notarized, if necessary.
• File the necessary paperwork with the state.
• Once the filing is complete, the LLC partnership agreement is in effect.

How you’ll know when you can check this off your list and move on to the next step:

• You can check this off your list and move on to the next step when all parties have signed, dated, and notarized the agreement, and it has been filed with the state.

Review the agreement to ensure all parties are in agreement

• Read through the LLC Partnership Agreement thoroughly, ensuring all parties are in agreement with the contents
• Discuss any changes or additions to the agreement with all parties
• Resolve any disputes or disagreements among the parties
• Make necessary updates or amendments to the agreement
• Once all parties are in agreement, you are ready to move onto signing and dating the agreement.

Sign and date the agreement

• Each partner should sign and date the agreement
• All signatures should be witnessed and notarized
• When all partners have signed and dated the agreement, it is considered legally binding
• Check that all sections of the agreement are completed and signed before filing

File the agreement with the necessary government agencies

• Contact the Secretary of State’s office in your state to determine the filing requirements for a Limited Liability Company (LLC) Partnership Agreement.
• Gather the necessary documents and information needed to file the agreement, such as a completed articles of organization form, list of members, and other relevant documents.
• Submit the necessary documents, forms, and applicable fees to the Secretary of State’s office.
• You will know you have completed this step when you receive a confirmation or receipt of filing from the Secretary of State’s office.

FAQ

Q: How do I know which jurisdiction my LLC Partnership Agreement is governed by?

Asked by Isabella on October 10th, 2022.
A: Your LLC Partnership Agreement will be governed by the jurisdiction in which it was formed. If you are forming an LLC in the United States, you will need to comply with the laws of the state in which it is registered. If you are forming an LLC in the United Kingdom, you will need to comply with UK corporate law. The same goes for any other country in which you are forming an LLC, such as the European Union. It is important to consult with a lawyer in order to ensure that your LLC Partnership Agreement meets all applicable legal requirements.

Example dispute

Suing a LLC Partnership Agreement

• Plaintiff might reference the LLC Partnership Agreement when raising a lawsuit if the Agreement was not followed by one or more of the partners.
• The lawsuit might include claims that the Agreement was breached, and the plaintiff might seek damages for any losses or harm caused by the breach.
• The plaintiff must prove that the Agreement was breached, that the breach caused their losses or harm, and that the Agreement was legally enforceable.
• The settlement of the lawsuit may involve the partners in the LLC Partnership Agreement paying damages to the plaintiff, or the Agreement may be amended or modified to address the breach.
• The damages awarded to the plaintiff may be calculated based on the financial losses or harm suffered due to the breach.

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