A partnership is an association of two or more persons or entities that operate a business for profit as owners. Other legal entities, such as a Limited Liability Company or a trust, may serve as a partner of a general partnership or a limited partner of a limited partnership.
In Texas, general partnerships are governed by the Business Organizations Code, Chapter 152. If a limited or general partnership does not adopt a partnership agreement, the partnership is governed by default terms set out in the Business Organizations Code. It is very important for a partnership that does not want to be governed by the default rules of the Business Organizations Code to adopt a written partnership agreement.
A partnership agreement is a type of contract that governs the partner’s interactions, obligations, and rights under the partnership, including (i) management; (ii) decision-making; (iii) liability; (iv) sharing of profits and losses; (v) partnership property; (vi) tax treatment; (vii) transfer of ownership; (viii) admitting additional partners; and (ix) terminating the partnership.