What a partnership agreement is — and why it prevents disputes
A partnership agreement is the contract between people going into business together. It records who contributes what, how profits and losses are shared, who does what, how decisions are made, and what happens when a partner joins, leaves, or the partnership ends. In Kenya, the absence of one is behind a huge share of business breakups.
The time to agree these terms is at the start, while everyone is optimistic — not later, in the middle of a dispute. A good agreement covers capital, profit-sharing, roles, decision-making, banking, admission and exit, dissolution, and how disputes are resolved, all under Kenyan law (including the Partnership Act). It's cheap insurance against an expensive falling-out.
What a partnership agreement should include
- ◆The partners and the business name and nature
- ◆Each partner's capital contribution
- ◆How profits and losses are shared
- ◆Roles, responsibilities and decision-making
- ◆Banking and accounts
- ◆Admission, retirement, dissolution and dispute resolution
Common mistakes to avoid
- ✕No written agreement — the commonest and costliest mistake
- ✕Vague profit-sharing that partners later remember differently
- ✕No process for a partner leaving or a dispute arising
- ✕Silence on who can bind the partnership or spend its money
Questions
Do I need a partnership agreement in Kenya?
It isn't legally compulsory, but without one the default rules of the Partnership Act apply — which may not reflect what you actually agreed. A written agreement lets you set your own terms and is strong evidence if there's a dispute.
How are profits shared if we don't say?
Under the default rules, partners share profits and losses equally, regardless of unequal contributions — which is often not what people intend. If you want a different split, put it in writing.
What happens if a partner wants to leave?
Whatever the agreement provides — notice, valuation of their share, and how they are paid out. Without an agreement, a partner leaving can trigger dissolution of the whole partnership, which is disruptive.
Is a partnership the same as a company?
No. A partnership is not a separate legal person and partners are personally liable for its debts; a company (registered with the Registrar) is separate and limits liability. If limited liability matters, consider registering a company instead.
This tool is free to write and preview, and gives you an editable draft in professional sections — adjust the wording to your business. Downloading a clean PDF without the small watermark is KES 200 in Kenya (a one-off) and free elsewhere. No account needed; your business details are saved on your own device.