Most partnerships fail because they skipped the boring part: the entity choice and the operating agreement. Lawma helps you do both — a licensed attorney reviews the final document. The guided intake is free; the attorney you choose quotes a flat fee before any work starts.
Why this matters
Two friends start a business on a handshake. Three years in, one wants to sell, the other wants to grow, the third is quietly checked out. Now there's no buy-sell, no deadlock procedure, no rules for who owns what — and whatever your state's default partnership law says is what you get. Almost always, that's not what you would have agreed to up front.
A real partnership agreement is what keeps a great partnership intact when something hard happens. It is, in practice, the single most valuable document a co-owned business will ever sign.
Step 1 — pick the right entity
The entity decision drives almost everything that follows: who is personally on the hook, how you're taxed, how you take in outside money, and how clean the exit can be. Lawma walks you through four core questions and recommends the structure that fits.
The four questions
How Lawma decides
Your answers feed a recommendation framework that an attorney reviewed. We don't pretend the entity question is just a form choice — it's a real business decision with downstream consequences for years. We surface the trade-offs in plain English and then a licensed attorney confirms or adjusts the recommendation.
Sole proprietorship
One owner. No filing, no separation between you and the business. Maximum simplicity, maximum personal liability. Almost never the right answer when you have a partner.
General partnership (GP)
Two or more owners running the business together. No filing required in most states (you're a GP by default the moment you agree to share profits). Every partner is personally liable for everything. Almost always inferior to an LLC.
Limited partnership (LP)
One or more general partners who manage and bear liability, plus limited partners who invest but don't manage. Common in real-estate deals and some fund structures.
Limited liability partnership (LLP)
A partnership where every partner gets liability protection from the partnership's debts and from other partners' malpractice. In many states LLPs are restricted to licensed professions (lawyers, accountants).
Limited liability company (LLC)
The default modern answer for most small co-owned businesses. Liability protection of a corporation, pass-through taxation of a partnership, and flexible governance. The agreement we draft is technically an “operating agreement” but does the same job.
S-corporation
A tax election (not a separate entity type) that lets an LLC or corporation pass through profits while paying owner-employees a salary — often saving self-employment tax for active owners. Strict rules: U.S. owners only, one class of stock, <100 shareholders.
C-corporation
Separate taxpayer with corporate-level tax. Required for most venture-backed startups (preferred stock, stock options, multiple classes). Heavier compliance, but the only realistic answer if you intend to raise a priced round.
Step 2 — assemble the agreement
This is where Lawma is meaningfully more substantive than a form-filing service. Each term below is a real decision — we'll surface it, explain the trade-offs, take your answer, and a licensed attorney reviews the finished document.
Capital contributions
Who is putting in what — cash, equipment, IP, sweat equity, real estate. How initial contributions are valued, and what happens if a partner needs to contribute more later (mandatory capital calls vs. dilution vs. loans).
Profit & loss allocation
How profits and losses are allocated on the books. Not always the same as ownership percentage — partnerships allow special allocations (subject to IRS substantial economic effect rules), so a 60/40 owner pair can split profits differently for legitimate reasons.
Distributions
When and how money actually leaves the business and lands in partner pockets. Are distributions discretionary or required? Do they follow a waterfall (e.g., return of capital first, then a preferred return, then a split)? What happens to retained earnings?
Management & voting
Member-managed or manager-managed? Which decisions take a simple majority, which take a supermajority, which take unanimity? Common supermajority items: admitting new partners, taking on debt, selling the business, amending the agreement.
Transfer restrictions
Can a partner sell, gift, or pledge their interest? To whom? Common protections: right of first refusal, tag-along rights for minority partners, drag-along rights for the majority, restrictions on transfers to competitors or ex-spouses.
Buy-sell provisions
The most important clause most partnerships skip. What happens when a partner leaves, dies, becomes disabled, or divorces? Triggering events, valuation method (formula, appraisal, agreed-value), payment terms (lump sum vs. multi-year note), funding (life insurance is common).
Deadlock resolution
Two equal partners disagree on a fundamental decision. Without a clause, that's a lawsuit. With one — a neutral tie-breaker, mandatory mediation, a shotgun clause, or a buyout right — it's a procedure.
Dissolution & winding up
How the partnership ends, who handles the wind-down, in what order debts and capital accounts are paid, and what happens to the name, assets, customer lists, and IP.
Indemnification
When the partnership stands behind its managers and officers — and when it doesn't. Carve-outs for fraud, gross negligence, and willful misconduct are standard.
IP assignment & non-compete
Who owns what the partnership produces? What happens to IP a partner brought in? Can a departing partner compete — and if so, where and for how long? (See non-compete review for the enforceability question.)
How a Lawma partnership package works
How pricing works
Your lawyer charges a pre-negotiated flat fee — typically $200 to $3,500, depending on complexity. Entity formation + a from-scratch partnership agreement sits at the high end of that range. That single fee covers your attorney's work AND everything Lawma does.
For comparison, an outside law firm typically charges $3,000 to $10,000 for a from-scratch entity formation and partnership agreement. Generic form services hand you a template and leave the hard decisions to you.
If you qualify for legal aid, your fee is waived. Permanently.That's a Lawma commitment.
Drafts and uploads are treated as attorney-client privileged.
Traditional-attorney fee ranges are market estimates from industry surveys; specific quotes vary by attorney, jurisdiction, and matter complexity.
Related
See contract review if you're a small business that's already formed and just need a contract reviewed, and non-compete review if your agreement includes a restrictive covenant on departing partners.
Accounting, document workflow, payroll, and the infrastructure a newly-formed partnership needs in its first year. Lawma earns a small fee when you use one.
Business insurance
Northstar Insure
Professional-liability and general-liability coverage for artists, designers, photographers, and small studios. Quotes in minutes.
Accounting
Fieldnotes CPA
Affordable bookkeeping, sales-tax registration, and 1099 filings for freelancers and small businesses. Flat monthly pricing.
Document workflow
Ironclad Stack
Template library, redlining, and tracked e-signature for one-sided and mutual NDAs, vendor agreements, and partnership docs. Audit-ready storage.
Intake happens on Lawma — you never hand your details to a third-party form. Lawma earns a small referral fee when you connect with a partner; we only list services that meet our review bar, and we never run ads on your case file.
Guided intake is free. Substantive, not a form. Reviewed by a real lawyer who quotes a flat fee before any work starts.
Sources: IRS Statistics of Income — Partnership Returns (Form 1065 filings have run in the high-3M to ~4M range in recent years); U.S. Small Business Administration Office of Advocacy, 2025 Small Business Profile (~36.2M U.S. small businesses, many co-owned).
