Partnership Agreement (Canada) by OLL
Establish a general partnership for carrying on business in a Canadian common-law province or territory. This template outlines unlimited personal liability, capital contributions, profit distribution schedules, and management authority between two or more partners.
This document comes from OLL's library of vetted legal templates
PARTNERSHIP AGREEMENT
This template is for a general partnership between two or more people or entities carrying on business together in a Canadian common-law province or territory. It is not suitable for a limited partnership, a limited liability partnership, or a corporation. It is not suitable for use in Quebec.
Drafting notes appear in italics and are to be deleted before execution. Square brackets mark information to be filled in. Delete any inapplicable optional clauses and renumber before execution.
This template assumes two Partners for readability. If there are more than two, replicate the parties block and the signature block for each additional Partner, and adjust Schedule A accordingly.
⚠️ Unlimited personal liability. In a general partnership, each Partner's personal assets can be used to satisfy the Partnership's debts and obligations, including obligations created by the other Partners acting in the ordinary course of the Business. This Agreement governs the Partners' rights as between themselves — it does not and cannot limit that exposure to third parties. Partners who want to limit personal liability should take advice on a limited liability partnership (where the Partners' profession permits one) or a corporation with a shareholders' agreement instead.
THIS AGREEMENT is made as of [Date].
BETWEEN:
[Partner 1 Legal Name], of [Partner 1 Address]
("[Partner 1 Short Name]")
— and —
[Partner 2 Legal Name], of [Partner 2 Address]
("[Partner 2 Short Name]")
(each a "Partner" and together the "Partners")
WHEREAS the Partners wish to carry on business together as partners on the terms set out below;
NOW THEREFORE in consideration of the mutual covenants below, the Partners agree as follows:
Formation, Name and Place of Business
The Partners form a general partnership (the "Partnership") under the name "[Partnership Name]", effective [Date].
The Partnership's principal place of business is [Address], or any other location the Partners agree on in writing.
The Partnership is a general partnership. It is not a limited partnership, a limited liability partnership, a corporation, or a joint venture.
This Agreement governs the Partnership between the Partners. Where this Agreement is silent, the default rules in the Partnership Act of the governing province apply. Insert the applicable citation: Ontario – Partnerships Act, R.S.O. 1990, c. P.5; British Columbia – Partnership Act, R.S.B.C. 1996, c. 348; Alberta – Partnership Act, R.S.A. 2000, c. P-3. Confirm the current citation for any other common-law province or territory before use.
If the Partnership carries on business under a name other than the Partners' own legal names, confirm whether the governing province requires the business name to be registered before the Partnership begins operating.
Business Purpose
The Partnership's business is [describe the business] (the "Business"), and any other business the Partners agree to in writing.
Term
The Partnership begins on [Start Date] and continues until dissolved in accordance with section 17.
A partnership with no fixed end date may otherwise be treated as a "partnership at will," meaning a Partner may be able to bring it to an end by notice under the governing Partnership Act's default rules. Section 17 is intended to displace that default and set out the Partners' own dissolution process — confirm the override is effective under the governing Act before relying on it.
Capital Contributions
Each Partner will contribute the capital described in Schedule A (the "Capital Contribution") by [Date].
No Partner is required to contribute capital beyond the amount in Schedule A unless the Partners unanimously agree in writing.
A Partner is not entitled to interest on their Capital Contribution unless the Partners agree otherwise in writing.
The Partnership will maintain a capital account for each Partner, recording that Partner's contributions, allocated share of profits and losses, and distributions received.
Profit, Loss and Distributions
Profits and losses of the Partnership are allocated among the Partners in the percentages set out in Schedule A (each Partner's "Partnership Interest").
Include the following if distributions are to be made on a schedule: The Partnership will distribute available cash to the Partners in proportion to their Partnership Interests [monthly / quarterly / annually], after setting aside reasonable reserves for the Partnership's expenses, debts and working capital.
No Partner may withdraw capital from the Partnership except as permitted by this Agreement or by the unanimous written consent of the Partners.
Management, Authority and Voting
Each Partner is entitled to participate in the management of the Partnership [in proportion to their Partnership Interest / equally, regardless of Partnership Interest].
Decisions in the ordinary course of the Business may be made by [a majority in number of the Partners / Partners holding a majority of the Partnership Interests].
The following decisions require the unanimous written consent of all Partners:
admitting a new Partner;
borrowing money outside the ordinary course of the Business, or granting a security interest in Partnership property;
selling, leasing or encumbering all or substantially all of the Partnership's assets;
amending this Agreement; and
any other matter the Partners designate in writing as requiring unanimous consent.
Each Partner will devote [such time as is reasonably necessary / [Number] hours per week] to the Business.
Each Partner is an agent of the Partnership for the purpose of its Business, and the act of each Partner for carrying on the Business in the usual way binds the Partnership and the other Partners, except where the acting Partner has no authority in the particular matter and the person dealing with that Partner knows of the lack of authority.
Include if any Partner will not work full-time in the Business, or has outside business interests — see section 14.
Clause 6.5 restates the default agency rule under the governing Partnership Act. It is what creates the unlimited personal liability described in the warning above — this Agreement cannot change how the Partnership binds its Partners as against third parties, only as between the Partners themselves.
Books, Records and Accounting
The Partnership will maintain complete and accurate books of account, on [a generally accepted accounting basis / a cash basis], at the Partnership's principal place of business or at [Location].
Each Partner may inspect and copy the Partnership's books and records on reasonable notice during normal business hours.
The Partnership's fiscal year ends on [Date]. The Partnership will provide each Partner with financial statements within [Number] days after each fiscal year end.
Banking
The Partnership will maintain one or more bank accounts in the Partnership's name at a financial institution the Partners agree on.
Cheques, transfers and withdrawals from Partnership accounts over [Amount] require the signature or authorization of [any one Partner / [Number] Partners / all Partners].
Admission of New Partners
A new Partner may be admitted only with the unanimous written consent of the existing Partners, on terms the existing Partners approve, including the new Partner's Capital Contribution and Partnership Interest.
As a condition of admission, a new Partner must agree in writing to be bound by this Agreement.
Schedule A is amended to reflect the admission of a new Partner and the resulting Partnership Interests.
Withdrawal of a Partner
A Partner may withdraw from the Partnership on [Number] days' written notice to the other Partners.
On withdrawal, the withdrawing Partner is entitled to be paid the value of their Partnership Interest, determined under section 13.
A withdrawing Partner remains liable for Partnership obligations incurred before the effective date of withdrawal. The withdrawing Partner is released from obligations arising after that date only to the extent permitted by law and by any agreement reached with the Partnership's creditors.
Expulsion of a Partner
The Partners other than the Partner subject to expulsion may expel that Partner by [unanimous / [Number]-out-of-[Number]] written vote, for:
a material breach of this Agreement not cured within [Number] days of written notice;
conduct that brings the Partnership or the Business into serious disrepute;
conviction of an indictable offence relevant to the Business; or
[other ground for expulsion].
An expelled Partner is entitled to be paid the value of their Partnership Interest, determined under section 13, and ceases to have any right to participate in the management of the Partnership from the effective date of expulsion.
Expulsion clauses are scrutinized closely by courts, particularly where exercised in bad faith or without a fair process. Give the Partner subject to expulsion notice and a reasonable opportunity to respond before the vote, and confirm the clause's enforceability with counsel before relying on it — this template does not take a position on whether any particular expulsion process is sufficient.
Death, Incapacity or Bankruptcy of a Partner
If a Partner dies, becomes permanently incapacitated, or becomes bankrupt, that Partner — or their estate, committee, or trustee in bankruptcy — ceases to participate in the management of the Partnership and is entitled to be paid the value of that Partner's Partnership Interest, determined under section 13.
The remaining Partners may elect, by unanimous written consent, to continue the Business rather than dissolve the Partnership under section 17.
Under general partnership law principles, the death, incapacity or bankruptcy of a Partner can otherwise trigger dissolution of the Partnership by operation of law. Section 12.2 is intended to let the remaining Partners continue the Business instead. Confirm this override is effective under the governing province's Partnership Act before relying on it.
Valuation and Buyout
The value of a departing Partner's Partnership Interest under section 10, 11 or 12 is determined by [agreement between the departing Partner, or their estate, and the remaining Partners / an independent valuator agreed on by the Partners or, failing agreement, appointed by [named appointing body] / the formula set out in Schedule B].
The Partnership will pay the value determined under section 13.1 [in a lump sum within [Number] days of the valuation / in [Number] equal instalments over [Number] months, with interest at [Rate]% per annum on the unpaid balance].
Funding a buyout is a common source of dispute, particularly on the sudden death or disability of a Partner. Consider whether the Partnership should maintain life or disability insurance on each Partner to fund payments under this section, and confirm the chosen interest rate complies with applicable federal disclosure requirements for annual interest rates before use.
Outside Activities; Non-Competition and Non-Solicitation
[Each Partner may engage in other business activities, provided they do not compete with the Business and do not interfere with that Partner's duties to the Partnership / Each Partner will devote their full business time to the Partnership and will not engage in any other business without the prior written consent of the other Partners].
During the term of the Partnership, and for [Number] months after a Partner ceases to be a Partner, that Partner will not [carry on, engage in, or hold a financial interest in, any business that competes with the Business, within [Geographic Area] / solicit any client, customer or supplier of the Partnership with whom that Partner had material contact while a Partner].
This is a restrictive covenant between business co-owners, not an employee non-compete — the Employment Standards Act prohibition on employee non-competition agreements does not apply to it. It remains subject to the common-law restraint-of-trade doctrine: a court may decline to enforce a restriction broader than reasonably necessary to protect the Partnership's legitimate business interests in scope of activity, geography and duration. Keep section 14.2 as narrow as the Business genuinely requires. This template does not take a position on whether any particular scope is enforceable — confirm with counsel before relying on it.
Confidentiality
Each Partner will keep confidential all non-public information relating to the Partnership's Business, finances, clients, suppliers and operations, and will not disclose it to any third party or use it other than for the Partnership's Business, except with the consent of the other Partners or as required by law.
Section 15.1 continues to apply after a Partner ceases to be a Partner for any reason, and after dissolution of the Partnership.
Dispute Resolution
The Partners will attempt in good faith to resolve any dispute arising out of this Agreement by negotiation, within [Number] days of written notice of the dispute.
If negotiation does not resolve the dispute, the Partners will refer it to mediation in [City, Province] before a single mediator agreed between them.
Include for binding arbitration instead of the courts: Any dispute not resolved under sections 16.1 and 16.2 will be finally resolved by arbitration before a single arbitrator seated in [City, Province], under [Arbitration Rules]. The award is final and binding.
Include this section if a staged process is wanted. Otherwise delete and rely on section 18.1.
Arbitration is governed by provincial arbitration legislation. Confirm the applicable statute and any mandatory requirements for the chosen seat before including section 16.3.
Dissolution and Winding Up
The Partnership dissolves on:
the unanimous written agreement of the Partners;
the sale of all or substantially all of the Partnership's assets;
an event that makes it unlawful for the Business to continue; or
as otherwise provided in this Agreement or under the governing Partnership Act.
On dissolution, the Partnership will be wound up in accordance with the governing Partnership Act. After payment of the Partnership's debts and liabilities, including amounts owed to Partners, any remaining assets will be distributed to the Partners in proportion to their Partnership Interests.
The Partner or Partners winding up the Partnership's affairs will act with reasonable diligence and account to the other Partners for their conduct of the winding up.
General
This Agreement is governed by the laws of the Province of [Province] and the federal laws of Canada applicable in that province. The Partners attorn to the exclusive jurisdiction of the courts of that province.
Insert one of the common-law provinces or territories. This template is not drafted for Quebec.
Sections 13 (to the extent any amount remains owing), 14 (Non-Competition and Non-Solicitation) and 15 (Confidentiality) survive a Partner ceasing to be a Partner for any reason, and survive dissolution of the Partnership.
This Agreement, together with its Schedules, is the entire agreement between the Partners and supersedes all prior discussions and agreements relating to its subject matter.
No amendment is effective unless in writing and signed by all Partners.
A Partner may not assign their Partnership Interest, or any right under this Agreement, without the unanimous written consent of the other Partners.
Notices under this Agreement must be in writing and sent to the address set out above, or to any other address a Partner notifies in writing. Notice is deemed received on delivery if delivered personally, on the next business day if sent by email before 5:00 p.m. local time in the recipient's jurisdiction, and [Number] business days after mailing if sent by prepaid mail.
A failure or delay in exercising a right is not a waiver of that right.
If any provision is held unenforceable, it is severed and the remainder continues in force.
This Agreement may be executed in counterparts and delivered electronically, each of which is an original and all of which together form one agreement.
Check the surviving-section list against the final numbering after optional clauses are deleted.
IN WITNESS WHEREOF the Partners have executed this Agreement as of the date first written above.
[Partner 1 Legal Name] | [Partner 2 Legal Name] |
Per: ______________________ | Per: ______________________ |
Name: [Name] | Name: [Name] |
Schedule A — Partners, Capital Contributions and Partnership Interests
Partner | Capital Contribution | Partnership Interest |
[Partner 1 Legal Name] | [Amount / description of contributed property] | [Number]% |
[Partner 2 Legal Name] | [Amount / description of contributed property] | [Number]% |
Partnership Interests should total 100%. Non-cash contributions (property, equipment, intellectual property) should be described and valued, and the Partners should agree in writing on the valuation method used.
Schedule B — Valuation Formula
Include this Schedule only if section 13.1 uses a formula instead of agreement or an independent valuator. Delete this Schedule otherwise.
The value of a Partner's Partnership Interest is calculated as:
[Set out the agreed formula — for example, a multiple of trailing average earnings, book value of the capital account, or fair market value of Partnership assets less liabilities, allocated by Partnership Interest.]
A valuation formula fixed at the outset can become unfair to one side as the Business changes over time. Revisit the formula periodically, or provide for an independent valuator to apply it.
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Canada note
This version is drafted for Canada. Provinces differ on employment standards and Quebec applies civil law rather than common law. Tell GitLaw which province applies and it adjusts the draft.
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