Partnership Agreement AU | Partnership Act Compliant

A partnership agreement is a legally binding contract between partners that sets the internal rules of their firm. Under Australian law a partnership is the relation which subsists between persons carrying on a business in common with a view of profit, and it exists whether or not anyone signed anything. That is the trap. Two people who open a cafe together and split the takings are already partners, and if they never wrote terms down, the Partnership Act of their state fills the gap with a set of default rules that treat every partner as equal regardless of what they actually put in.

The agreement is what displaces those defaults. It is worth distinguishing it clearly from three neighbours founders often confuse. A partnership is not a company: a company is a separate legal entity registered under the Corporations Act 2001 (Cth), while a general partnership has no legal personality of its own and the partners carry the firm's liabilities personally. A partnership agreement is also not a shareholders agreement, which governs the relationship between owners of a Pty Ltd company rather than partners in a firm. If you are unsure which structure you are actually running, our Australian shareholders agreement for Pty Ltd companies and this partnership template sit on opposite sides of that line. Finally, a partnership is not a joint venture, which is usually a single project rather than an ongoing business carried on in common. Getting the label right matters because it decides which statute governs you and how far your personal assets are exposed.

Australia has no single national partnership statute. Each state and territory legislates separately, and the eight Acts are close cousins of the English Partnership Act 1890 but differ in section numbering and a handful of substantive rules. The relevant law is the Partnership Act 1892 (NSW), the Partnership Act 1958 (Vic), the Partnership Act 1891 in Queensland, South Australia and Tasmania, the Partnership Act 1895 (WA), the Partnership Act 1963 (ACT), and the Partnership Act 1997 (NT). You are governed by the Act of the jurisdiction where the business is carried on, so a firm operating across borders may find more than one Act in play. The Commonwealth Corporations Act 2001 does not apply to a general partnership, a point that trips up founders who assume company-style protections attach automatically.

The defining feature of these Acts is that almost every internal rule is a default that yields to your agreement. Section 24 of the NSW Act and section 28 of the Victorian Act, mirrored across the other jurisdictions, provide that in the absence of contrary agreement all partners share capital and profits equally and contribute equally to losses. That rule bites hard when one partner tipped in the entire startup capital and the other contributed labour; the statute would still split profits down the middle. The Acts also make each partner an agent of the firm, so any partner can bind all the others to a contract entered in the ordinary course of business, whether or not the others agreed. The statutory duties are real too: partners must render true accounts (s.28 (32) VIC), must not make a private profit from the firm without consent (s.29 (33) VIC), and must not compete with the firm. On the way out, the default position is stark. A partnership at will can be dissolved by any partner giving notice at any moment (Partnership Act 1958 (Vic) s.36), and death or bankruptcy of a single partner dissolves the whole firm unless the agreement says otherwise (s.37). Registration is not required to form a general partnership, though a business name usually must be registered federally under the Business Names Registration Act 2011 (Cth). The official overview of partnership structures and each state's registering authority is published on the Australian Government's business.gov.au guide to partnership structures.

The clearest trigger is starting a business with one or more people and putting real money or property into it. The moment capital is unequal, silence becomes dangerous, because the statutory equal profit share ignores who funded what. A written agreement fixes each partner's contribution and the split before anyone earns a cent. The second common scenario is admitting a new partner into an existing firm, which under the default rules can reset terms and even dissolve the original partnership if not handled carefully. You want the entry priced, the incoming partner's liability for pre-existing debts settled, and the profit share recalculated in advance.

Exit planning is the third and most neglected reason. Most partners write nothing until someone wants out, by which point the leverage is gone and the Act's brutal default (dissolution on notice) is the only tool left. A firm that has drafted buy-out terms and a valuation method can lose a partner without losing the business. Death and incapacity sit alongside this: without a continuity clause, the death of one partner legally ends the firm, freezing accounts at the worst possible time for a grieving family. A fourth situation is the professional practice, common among accountants, architects, and medical practitioners, where partners share a licence-based business and need express rules on client files, restraint of trade, and drawings. One edge case worth flagging is the salaried partner who is called a partner but paid like an employee; if the relationship looks like employment in substance, entitlements under the Fair Work Act 2009 (Cth) can be claimed regardless of the label, so the agreement must be honest about whether someone is a true equity partner. If your working relationship is really employment, an Australian employment contract compliant with the Fair Work Act is the correct document instead.

• The capital contributions clause records exactly what each partner brings in, whether cash, equipment, property, or goodwill, and fixes the value agreed at the outset. This is the single most important departure from the statutory default, because it lets you tie profit share to contribution rather than accepting the equal split imposed by s.24 NSW or s.28 Vic.
• The profit and loss sharing clause sets the distribution ratio and the treatment of drawings, retained earnings, and interest on capital advances. It also states how and when partners may draw funds, closing off the common dispute where one partner quietly takes more than their share throughout the year.
• The management and decision-making clause defines which decisions need unanimity, which need a majority, and which any partner can take alone. It works with a schedule of reserved matters so that large commitments, borrowings, or the hiring of staff cannot be forced through by a single partner exercising the statutory agency power.
• The authority and binding clause limits the mutual agency the Acts otherwise grant, requiring co-signature above a stated threshold so that no partner can saddle the firm with a contract the others never sanctioned.
• The admission and retirement clause governs how new partners join and how existing partners leave, including notice periods, the valuation method for a departing partner's share, and whether the firm continues rather than dissolving. Pairing this with a confidentiality obligation protects client and pricing information, and our Australian NDA drafted to breach-of-confidence law can sit alongside it for sensitive dealings.
• The dissolution and winding-up clause sets the order in which assets are realised and debts paid, displacing the rigid statutory distribution rules and giving surviving partners a clean, agreed path when the firm ends.

New South Wales partnerships fall under the Partnership Act 1892 (NSW), where the equal-sharing default sits in s.24 and the dissolution rules in ss.32 to 44. NSW also recognises the incorporated limited partnership, a rare structure that is a separate legal entity under s.53, but the ordinary trading partnership is not. Partners should note that under s.5 any partner's act in the ordinary course of business binds the firm, so the agreement's authority limits carry real weight. A firm carrying on business in NSW must register its business name federally, and where partners hold land the agreement should record whether that land is partnership property under s.20, since title held in one name can still belong to the firm.

Victoria applies the Partnership Act 1958 (Vic), whose s.28 is the counterpart to NSW's s.24 and sets equal capital, profit, and loss sharing absent agreement. Victoria's Act spells the fiduciary duties out clearly across ss.32 to 34, covering accounts, private profits, and non-competition, and its dissolution framework runs from s.36 (dissolution by notice) through s.44. Victorian professional partnerships, common in law and accounting, rely heavily on express restraint and client-file clauses because the Act itself says little about post-exit competition beyond the general duty.

Queensland operates under the Partnership Act 1891 (Qld), one of the three 1891 Acts. Its default rules track the same equal-sharing model, and it treats the firm as an aggregate of partners rather than a separate person, meaning each partner is jointly liable for the firm's debts. Queensland registers limited partnerships and incorporated limited partnerships through the state authority, and a general partnership carrying on business under a name other than the partners' surnames must hold a registered business name. The agreement should be explicit on liability apportionment between partners, because the Act's default leaves each partner exposed to the full extent of firm debt.

Western Australia is governed by the Partnership Act 1895 (WA), the oldest of the state Acts, supplemented by the Limited Partnerships Act 2016 (WA) for limited structures. The 1895 numbering differs from the eastern states, but the substance is the same: equal sharing by default, mutual agency, and dissolution on notice for a partnership at will. WA partners running asset-heavy ventures such as mining services or agriculture should pay particular attention to the partnership-property clause, since the Act's default treatment of jointly used assets can produce unexpected results on dissolution.

You begin by selecting the state or territory where the business is carried on, and the template loads the correct Partnership Act references and default rules for that jurisdiction so the drafting speaks to the law that actually governs you. From there you enter the partners' full names and the firm's business name, then record each partner's capital contribution, describing cash, property, or services and the value agreed. The form then asks how profits and losses are split, letting you choose an equal division or a fixed ratio tied to contribution, and it captures drawing rights and any interest on advances. Next you set the decision-making rules, marking which matters need unanimity and which a partner may decide alone, and you set the authority threshold above which co-signature is required. The exit section walks you through admission of new partners, retirement notice periods, the valuation method for a departing share, and whether the firm continues on a partner's death. You finish with the dissolution waterfall and the signing block. Once complete, you download the agreement in editable Word and ready-to-sign PDF, and you can revisit and adjust the terms as the firm grows. The full catalogue of Australian business and personal templates is available through the Captain.Legal document library for Australia.

The most expensive mistake is having no agreement at all and assuming goodwill will hold. When it does not, the state Partnership Act takes over, and its equal-split rule ignores who funded the business while its notice-based dissolution lets any partner blow the firm up overnight. The second recurring error is silence on exit and death. Partners draft the fun clauses about profit and forget that without a continuity provision, one partner's departure or death legally dissolves the whole firm, freezing bank accounts and stranding clients. A third mistake is leaving the mutual agency power untouched, so one partner signs a lease or loan the others never approved and the entire firm is bound; the agreement should cap individual authority and require co-signature above a threshold.

Founders also routinely confuse structures, running what is legally a partnership while believing they have the liability shield of a company. A general partnership offers no such shield, and personal assets are on the line for firm debts, which is why choosing between a partnership and a Pty Ltd matters before revenue arrives. Our Australian company constitution drafted to the Corporations Act is the right starting point if you decide to incorporate instead. The final common error is vagueness on valuation. An agreement that says a departing partner is "paid out fairly" invites exactly the dispute it was meant to prevent; a defined method, whether book value, an independent valuer, or an agreed multiple, is what makes an exit clean. Browsing the wider business legal documents category for Australia helps you line up the supporting contracts a partnership usually needs alongside the core agreement.