What Should Your Partnership Agreement Include? (2026 Updated)

Going into business with someone you trust can feel like the easiest part of starting up.

But when money, customers, deadlines and decision-making enter the mix, even great relationships can get complicated fast. That’s why a well-drafted partnership agreement matters so much - it helps you and your business partner(s) stay on the same page, and gives you a clear plan for what happens when things change.

This guide is updated for current New Zealand small business conditions, where partnerships are common in fast-moving service and ecommerce businesses - and where a “we’ll figure it out later” approach can create expensive disputes.

Let’s break down what your partnership agreement should include, why each section matters, and how to make sure you’re protected from day one.

Do You Really Need A Partnership Agreement In New Zealand?

If you’re operating as a partnership (even informally), you’re already in a legal relationship with your partner - whether you’ve signed anything or not.

In New Zealand, many partnerships exist simply because two or more people:

• carry on a business together,
• with a view to making a profit,
• and share profits (and often costs).

The risk is that if you don’t have a written partnership agreement, you’re effectively relying on default legal rules and assumptions about “fairness”. Those defaults may not match how you actually want your business to run.

A tailored agreement helps you:

• avoid misunderstandings about roles, contributions and payments;
• set decision-making rules (so you don’t deadlock);
• protect your business name, IP, customer relationships and confidential information;
• plan for what happens if someone wants to leave (or has to); and
• reduce the chance of a costly dispute down the track.

It can feel awkward to bring up “what if we fall out?” early on, but it’s usually far less awkward than arguing about it later when money’s on the line.

What Key Business Details Should A Partnership Agreement Cover?

The first job of your partnership agreement is to clearly describe what the partnership actually is.

That sounds basic, but it’s where many disputes start - one person thinks the partnership is “just a side hustle”, the other thinks it’s a long-term growth business that requires reinvestment and full-time effort.

1. The Partnership’s Basics

Start with clear details such as:

• Who the partners are (legal names and addresses);
• The business name and any trading names;
• What the partnership does (your business activities);
• When it starts (and whether it’s for a fixed term or ongoing);
• Where it operates (and whether it can expand to other locations/online).

If you’re unsure whether your business name needs formal protection, it’s worth thinking about trade marks early - leaving it too late can mean you build a brand you can’t safely own. A quick Trade Mark Search Report can help you sense-check the name before you invest heavily in signage, websites and packaging.

2. What Each Partner Is Contributing

This is where you get practical and specific. Contributions aren’t always equal - and that’s okay - but they should be clear.

Your agreement should spell out contributions like:

• Capital contributions (cash invested at the start and any future funding obligations);
• Assets (vehicles, equipment, tools, stock, or access to a premises);
• Time and labour (expected weekly hours, operational responsibilities);
• Skills and networks (e.g. one partner brings industry relationships or sales pipeline);
• Intellectual property (branding, software, designs, templates, training materials).

It’s also smart to clarify whether contributions are:

• a one-off upfront contribution,
• an ongoing obligation, or
• a loan to the partnership that gets repaid.

This prevents arguments later like “I put in the same effort” versus “I funded the entire setup”.

How Should You Handle Profits, Losses, Expenses And Drawings?

Money terms are often where partnerships either run smoothly - or fall apart.

A strong partnership agreement will deal with both the good news (profits) and the hard parts (losses and cash flow pressure).

1. Profit And Loss Shares

Not every partnership is a 50/50 split, and it doesn’t need to be. What matters is that you clearly agree on the method.

Common approaches include:

• Fixed percentages (e.g. 60/40 based on capital or workload);
• Tiered splits (e.g. first $X recoups an initial contribution, then it’s split evenly);
• Role-based remuneration plus split (one partner is paid a management fee, then profits are shared).

Also clarify whether partners share losses in the same proportion as profits (often they do, but don’t assume).

2. Expenses And Reimbursements

Day-to-day spending causes friction when it’s not agreed upfront.

Your agreement should cover:

• what expenses are partnership expenses versus personal expenses;
• whether partners can be reimbursed (and what evidence is required);
• spending limits (e.g. anything over $500 needs both partners’ approval);
• who controls bank accounts and payment systems.

3. Drawings And Partner Payments

Many partnerships pay partners through “drawings” (taking money out over time), rather than a salary.

It’s important to set rules around drawings such as:

• how often drawings can be taken (weekly/monthly/ad hoc);
• maximum amounts or conditions (e.g. only if GST and tax provisions are set aside);
• what happens if one partner takes more than agreed (repayment or adjustment mechanisms).

If you’re considering a structure where the business is operated through a company instead (often for risk and growth reasons), this is the point where it can help to step back and compare structures. In some cases, a Partnership is the right fit; in other cases, a company can create clearer lines between business and personal finances.

What Decision-Making Rules And Roles Should Be Included?

Partnerships work best when everyone knows who does what - and how decisions get made when it really matters.

1. Roles And Responsibilities

Even if you’re both “doing everything” at the start, it’s still worth setting expected roles such as:

• who manages operations and delivery;
• who handles sales and marketing;
• who looks after suppliers and purchasing;
• who controls the books, invoices and payments;
• who hires and manages staff/contractors.

This doesn’t need to lock you in forever - it just creates clarity and accountability.

2. Day-To-Day Decisions Vs Major Decisions

A practical way to avoid conflict is to separate:

• routine decisions (e.g. ordering stock, handling customers, day-to-day spending under an agreed threshold), and
• major decisions (e.g. taking on debt, signing a lease, hiring staff, changing pricing, entering new markets, buying equipment).

Your agreement should state which decisions require:

• one partner to decide (within their role),
• majority approval (if there are 3+ partners), or
• unanimous agreement (common for big, high-risk decisions).

3. Deadlocks (What If You Can’t Agree?)

Deadlocks are one of the most common partnership “silent killers”. The business doesn’t necessarily fail because the partners dislike each other - it fails because no one can make a decision.

Common deadlock solutions include:

• a nominated managing partner with a casting vote for specified matters;
• referral to mediation before any court action;
• a buy-sell mechanism (one partner offers to buy the other out at a set price, and the other must either accept or buy at the same price).

The best option depends on your business, personalities and bargaining power - which is why tailored drafting matters.

How Do You Protect The Business (And Your Relationship) If Things Change?

Most people start a partnership expecting it to last. But businesses evolve - and so do people’s circumstances.

Your partnership agreement should include “what if” clauses that protect both the business and the working relationship, especially when there’s pressure.

1. Bringing In A New Partner

If you ever want to add a new partner, you’ll want a clear process for:

• how a new partner is approved;
• what contribution they must make;
• how profit shares change; and
• whether they must sign a deed of accession to be bound by the agreement terms.

Without this, one partner may try to bring in a friend or investor informally - which can change control and expectations overnight.

2. A Partner Leaving (Voluntarily Or Not)

This is a crucial section. You should address:

• resignation (notice period, handover obligations);
• retirement or reduced involvement (what happens if they want to step back);
• incapacity (temporary or long-term illness/injury);
• death (what happens to their share and whether the estate becomes involved);
• expulsion (serious misconduct, breach of obligations, fraud, repeated failures to perform).

This is also where you define whether the partnership automatically dissolves when someone leaves, or whether the remaining partner(s) can continue the business.

3. Valuation And Buyout Mechanisms

If someone exits, how do you value the business fairly?

Options include:

• an agreed valuation formula (e.g. a multiple of EBITDA or average net profit);
• an independent valuer appointed jointly;
• a staged payment plan for buyouts (to avoid cash flow shock);
• rules about whether goodwill is included.

It’s also important to address what happens to customer relationships, work in progress, and outstanding invoices during a transition.

4. Restraints, Confidentiality And IP Ownership

This is where you protect the value you’re building together.

Your agreement should set out:

• confidentiality obligations (customer lists, pricing, suppliers, processes);
• ownership of IP created during the partnership (logos, content, software, templates);
• restraint provisions (reasonable limits on competing or soliciting clients for a period after exit).

If you’re building anything brand-heavy or content-driven, it’s worth getting the IP side right early. Sometimes that means putting a separate IP Assignment in place so it’s crystal clear what the partnership owns versus what an individual partner owns.

And if you’re sharing sensitive commercial information during the setup phase (before everything is fully operational), a Non-Disclosure Agreement can help set expectations before deep collaboration begins.

5. Dispute Resolution

Disputes don’t always mean the partnership is over - but without a process, they can escalate quickly.

A partnership agreement usually includes a stepped approach like:

• partners meeting and attempting to resolve the issue in good faith;
• mediation with an independent mediator;
• arbitration or court (as a last resort).

This keeps costs down and encourages practical problem-solving, especially where the business still needs to operate day-to-day.

What Other Legal Documents Might You Need Alongside A Partnership Agreement?

Your partnership agreement is a cornerstone document - but it’s rarely the only legal piece you’ll need.

Depending on how your business runs, you may also need to think about:

1. Customer And Supplier Contracts

If you’re selling products or services, you’ll usually want clear terms that manage payment, delays, liability, cancellations, and disputes. For many service businesses, a tailored Service Agreement is a practical starting point.

2. Employment And Contractor Documents

If you’re hiring, make sure you use the right type of agreement from the start - misclassifying staff can create real risk.

• If they’re employees, use an Employment Contract that matches their role and hours.
• If they’re genuinely independent, you’ll likely need a contractor agreement with clear deliverables and IP/confidentiality clauses.

This is also relevant because your partnership agreement should be consistent with who has authority to hire and manage workers (and who is responsible if something goes wrong).

3. Privacy And Data Protection

Many partnerships start small - a spreadsheet of leads, a booking system, a mailing list - and then grow quickly.

If you collect personal information (customer details, health info, delivery addresses, payment data, even IP addresses through your website), you need to take privacy seriously under the Privacy Act 2020. In many cases, having a clear Privacy Policy is part of building trust and meeting your obligations.

4. Considering A Company Instead Of A Partnership

Sometimes the best way to “partnership-proof” a business is to use a company structure with shares, director duties, and a shareholders agreement.

This isn’t right for everyone, but it can help if:

• you want to attract investors later;
• you’re taking on higher-risk work (or signing big contracts);
• you want clearer exit rules through share transfers; or
• you want the business to keep operating even if a founder exits.

If you go down this path, the equivalents to a partnership agreement are often a shareholders agreement and a Company Constitution, which set the rules for ownership, control and decision-making.

The right structure depends on your goals, risk profile, tax position and growth plans - so it’s worth getting advice specific to your situation.

Key Takeaways

• A partnership agreement helps you avoid relying on default legal rules and assumptions, and makes sure you and your partner are aligned from day one.
• Your agreement should clearly set out the partnership’s basics, each partner’s contributions, and what the business is actually trying to achieve.
• Profit shares, losses, expenses and drawings should be documented in practical detail to avoid cash flow disputes and resentment later.
• Decision-making rules (including how you handle deadlocks) are essential for keeping the business moving when you don’t agree.
• A strong partnership agreement plans for change, including partner exits, buyouts, valuations, restraints, confidentiality, and dispute resolution processes.
• Depending on your business, you may also need customer contracts, employment documents, privacy protections, and IP arrangements to fully protect what you’re building.

If you’d like help drafting or reviewing a partnership agreement (or working out whether a partnership is the best structure for your business), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.