What an Ontario partnership agreement is for
In Ontario, a partnership can begin without anyone signing anything: two people who start doing business together for profit are usually partners in law. When that happens, the Partnerships Act supplies the rules, and they were written long before most modern businesses existed. Partners share profits equally no matter who put in the money or does the work. No partner is paid for working in the business. A partner cannot be expelled. And when one partner dies or simply gives notice, the whole partnership can dissolve.
This agreement replaces those defaults with terms partners actually choose. It ties profit shares to agreed percentages, allows salaries and drawings, weights ordinary votes by ownership and lists the decisions that need everyone, limits each partner's authority to sign for the firm, and keeps the business alive when a partner leaves through a buy-out formula based on a valuation the partners update every year. It is written for small professional practices, trades businesses, retail and online businesses run as general partnerships.
When to use it
Use it when two or more people, or their corporations, start a business together as a general partnership in Ontario, and as soon as possible if you are already operating without one. It is also the right moment to sign one when a new partner joins.
It is not for limited partnerships, which must be registered under the Limited Partnerships Act and have limited partners who cannot take part in management, or for limited liability partnerships, which Ontario allows only for certain regulated professions. If your main concern is protecting personal assets from business debts, talk to an accountant about incorporating instead.
What's inside
The full list of sections and fields in this template, in the order they appear.
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The partnership
- Start date
- Firm name and Business Names Act registration
- Nature of business
- Place of business
- Term
-
Partners and capital
- Schedule A
- Initial capital
- Additional capital
- Capital accounts
- Partner advances and interest rate
-
Profits, losses and drawings
- Sharing by percentage
- Partner salaries
- Monthly drawings
- Distributions
- Income tax reporting
-
Management and decisions
- Time commitment
- Weighted ordinary decisions
- Eight unanimous decisions
- Authority limits
- Banking
- Meetings
-
Duties, records and insurance
- Good faith and full information
- Accounting for benefits
- Non-competition while a partner
- Books and inspection
- Fiscal year and accounts
- Tax registrations
- Insurance
-
Leave, admission and departure
- Vacation and illness
- Admission of new partners
- Six departure events
- Continuation of the partnership
- Expulsion grounds
- Notice to clients and registry
-
Buying a departing partner's interest
- Price formula
- Goodwill from valuation certificate
- Payment terms
- Release and indemnity
- Post-departure non-solicitation
-
Dissolution, disputes and general terms
- Dissolution events
- Winding-up order
- Mediation and arbitration
- Governing law
- Amendments
- Independent advice
- Signatures
-
Schedule A
- Partners
- Contributions
- Values
- Partnership percentages
- Property lent
-
Schedule B. Valuation Certificate
- Agreed goodwill value
- Date
- Signatures
-
Start-Up Checklist
- Name registration
- GST/HST
- Bank account
- Capital
- Insurance
- Licences
- WSIB
- Accountant
- Valuation
Preview pages
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Page 1 -
Page 2 -
Page 3
How to complete the agreement
- Register the firm name. If the name is not just the partners' own names, register it under the Business Names Act and write it in Section 1.2.
- Fill in Schedule A. List each partner's contribution and its value, the property only lent to the firm, and the partnership percentages, totalling 100%.
- Decide salaries and drawings. Choose whether any partner draws a salary before profits are shared and set the monthly drawing limit.
- Set decision rules and limits. Enter the borrowing, contract, legal claim and capital spending limits that need all partners, and the signing rules for the bank.
- Choose the time commitment and leave terms. Set expected hours, vacation and how long a sick partner keeps sharing profits.
- Set the departure terms. Choose the expulsion vote, the notice period for retirement, the buy-out payment schedule and any goodwill reduction on expulsion.
- Sign Schedule B. Agree on a current goodwill value and sign the valuation certificate; diarize a yearly update.
- Choose the dispute process. Enter the mediation location, and keep or change the arbitration clause.
- Sign and work through the checklist. Each partner signs with a witness, and the firm completes the start-up checklist.
Example: a completed buy-out excerpt
A fictional landscaping firm in Barrie, Greenline Landscapes, has two partners: Theo Lambert (60%) and Priya Sandhu (40%). Priya gives six months' notice of retirement in 2026:
Schedule B Valuation Certificate: goodwill valued at $180,000 as of February 1, 2026, signed by both partners. Priya's capital account: $42,000. Undistributed profit share to her retirement date: $11,500. Price: $42,000 + $11,500 + 40% of $180,000 ($72,000) = $125,500. Payment: 30% within 60 days ($37,650) and the balance of $87,850 in 24 monthly instalments with interest at 6% a year.
Because the agreement says a departure does not dissolve the partnership, Theo carries on the business without having to wind it up and restart it. The firm tells its suppliers, bank and regular clients that Priya has left, so she is not liable for debts the business takes on afterward, and updates its Business Names Act registration.
Ontario rules to know
These are the provisions of the Partnerships Act, R.S.O. 1990, c. P.5, that this agreement relies on or replaces.
- Default rules (section 24). Equal sharing of capital and profits; indemnity of partners; 5% interest on advances; no interest on capital; every partner may manage; no remuneration; no new partner without everyone's consent; majority for ordinary matters but unanimity to change the business; books open to every partner. All apply "subject to any agreement".
- Expulsion (section 25). Only with an express power agreed by the partners.
- Retirement and dissolution (sections 26, 32 and 33). An open-ended partnership can be ended by any partner on notice, and death or insolvency of a partner dissolves it, subject to agreement.
- Duties (sections 28 to 30). True accounts and full information; accounting for private profits; no competing business without consent.
- Liability (section 10). Every partner is liable jointly with the others for the firm's debts incurred while a partner.
- Final settlement (section 44). Debts to outsiders first, then partner advances, then capital, then the remainder in profit-sharing proportions.
- Business Names Act. Registration of a firm name that is not the partners' own names, renewed every five years.
Mistakes that break up partnerships
Most partnership breakdowns are about money and exits that nobody planned. One partner put in most of the capital but profits are split evenly because there is no agreement. One partner works full time and the other part time, with no salary arrangement to reflect it. A partner signs a large equipment lease without asking, and the firm is bound. When a partner wants out, there is no price formula, and the business may have to be wound up just to pay them. The percentage, salary, authority and buy-out sections of this agreement are there to settle those questions before they become disputes.
Frequently asked questions
Do you need a written partnership agreement in Ontario?
No. A partnership exists in Ontario whenever two or more people carry on business together with a view to profit, with or without paperwork. Without a written agreement, the Partnerships Act's default rules apply, including equal sharing of profits whatever each partner contributed and dissolution of the partnership when any partner dies.
How are profits split in an Ontario partnership without an agreement?
Equally. Section 24 of the Partnerships Act says all partners share equally in capital and profits and contribute equally to losses, unless they agree otherwise. Partners who contribute different amounts of money or time need a written agreement to share differently.
Can a partner be kicked out of an Ontario partnership?
Only if the partners have expressly agreed to an expulsion power. Section 25 of the Partnerships Act says no majority of partners can expel a partner otherwise. This agreement sets out specific grounds and the vote needed.
What happens to a partnership when a partner dies in Ontario?
Unless the partners agree otherwise, the death of a partner dissolves the partnership for all the partners under section 33. A buy-sell clause like the one in this agreement lets the remaining partners continue the business and buy the deceased partner's share from the estate.
Do I need to register a partnership name in Ontario?
Yes, if the partnership carries on business under a name other than the partners' own names. Register it under the Business Names Act through the Ontario Business Registry, and renew the registration every five years.
