No Partnership Agreement? What the Partnership Act in Your State Decides for You

With no partnership agreement, your state’s Partnership Act writes the terms for you. The default rules are old and blunt: partners share capital and profits equally whatever each put in, nobody is paid for working in the business, every partner is liable jointly for the firm’s debts, and the death or bankruptcy of one partner dissolves the partnership. Each Act lets partners agree otherwise, which is exactly what a partnership agreement is for.

Claim Done’s Business Partnership Agreement costs A$97 and records the terms two to four partners have actually agreed: capital, profit shares, drawings, decisions, the bank account and how a partner leaves. It is ready in about 5 minutes, and every partner reads it before anyone signs.

A partnership can start without anyone signing anything

A partnership is not something you register into. business.gov.au describes it as a business structure made up of 2 or more people who manage the business and share income or losses. If two friends start selling coffee together, split the takings and buy a machine on one partner’s card, that description already fits them, document or not.

The administrative side is light. According to business.gov.au, a partnership needs its own ABN and tax file number, must register for GST at an annual turnover of $75,000 or more, and lodges a partnership tax return with the ATO every year, while each partner pays income tax on their share. In a general partnership, each partner has unlimited liability for the partnership’s debts and obligations.

Light admin makes the agreement easy to skip as well, and then the Act’s defaults run the business.

The default rules, and what they do to an unequal partnership

Every state and territory has a Partnership Act, and the core rules read almost word for word alike. Using the New South Wales numbering (Partnership Act 1892, section 24), and subject to any agreement between the partners, express or implied:

• all partners share equally in the capital and profits and contribute equally to losses;
• every partner may take part in managing the business;
• no partner is entitled to pay for acting in the business;
• no new partner can join without the consent of all existing partners;
• ordinary matters are decided by a majority, but the nature of the business cannot change without everyone’s consent;
• every partner can inspect and copy the books.

Run the first rule against real numbers. Say one partner puts in $30,000 and the other $10,000, and the business makes $60,000 profit in its first year. On the Act’s starting point, the split is $30,000 each. Share in proportion to capital and it is $45,000 and $15,000. That $15,000 gap is what an unwritten understanding costs when the partners remember it differently. The Act’s words “express or implied” mean the partner who put in more can argue for an implied agreement, but that is an argument, not a clause.

The unpaid-work rule bites the same way. If one partner works in the cafe full-time and the other does the books on Sunday nights, the Act still says neither is entitled to pay for acting in the business. Any salary or different split has to be agreed.

Joint liability: why every partner’s name is on every debt

Each Act says every partner is liable jointly with the other partners for the debts and obligations of the firm incurred while they are a partner. The practical effect is that a supplier owed money by the partnership can look to each partner, not just the one who signed the order. business.gov.au calls it unlimited liability.

The joint liability rule is about the firm’s debts to other people, and the agreement is between the partners. What the agreement can do is control how debts get created: a dollar limit above which every partner must agree before the business spends or borrows, a rule that guarantees and leases need everyone’s signature, and a rule on who can approve payments from the business bank account. That is where the risk is managed. When the trust breaks down over money, our guide on a business partner taking company money covers the recovery steps.

Ending it: death, bankruptcy and notice

The defaults on ending a partnership are the most dangerous ones for a small business.

Death or bankruptcy. Subject to any agreement, the partnership is dissolved as regards all the partners by the death or bankruptcy (in Queensland and South Australia, insolvency) of any partner. In a two-person business, one partner’s death can end the partnership the survivor is still trying to run.

Leaving at will. Where no fixed term was agreed, any partner can end the partnership at any time by giving notice to all the others (New South Wales s 26; Western Australia s 37 requires the notice in writing). That notice does not just let one partner leave. It ends the partnership itself (the Act’s word is “determine”).

Expulsion. Under New South Wales s 25, a majority cannot expel a partner unless a power to do so was conferred by express agreement.

A written agreement replaces all three with something workable: a notice period to leave, a way to value the leaving partner’s share (an agreed annual value, an independent valuer, or book value), a period for the others to pay it out, and a rule that the business continues after a death or bankruptcy, with the share paid to the estate or trustee.

The Partnership Act in your state

Section numbers differ; the core rules barely do. As read on each official legislation register on 29 September 2026:

Western Australia adds one default of its own: no change may be made in the nature of the business, or the place where it is carried on, without the consent of all partners (s 34). Moving the cafe across town is a unanimous decision there unless your agreement says otherwise.

What to put in writing

The Acts themselves tell you what to cover, because every default is a clause you can replace. A partnership agreement worth signing deals with:

1. What each partner puts in, and what it is worth.
2. How profits and losses are shared, and how drawings work against that share.
3. Each partner’s role and time, and whether anyone is paid for it.
4. Which decisions need every partner, including a spending or borrowing limit.
5. Who can approve payments from the bank account, and access to the books.
6. How a new partner joins.
7. How a partner leaves, how their share is valued and how fast it is paid out, including on death, bankruptcy or long-term incapacity.
8. What happens if you disagree, before anyone reaches for a court form.

If the partnership will involve sharing recipes, client lists or pricing with someone before you commit, a non-disclosure agreement covers that earlier stage.

Claim Done’s Business Partnership Agreement: A$97

For a general partnership of two to four individuals, not a company or trust, in any state or territory. The agreement names your state’s Partnership Act and records where you have agreed something different, with:

• a capital table and a profit and loss share table, worked out for equal, proportional or custom percentages;
• drawings, roles and time, and no salary unless everyone agrees in writing;
• a list of decisions that need every partner, including your spending limit, and the bank approval rule;
• books and records, and new partners joining;
• leaving: your notice period, your valuation method and your payout period, plus continuation after death, bankruptcy or six months’ incapacity;
• a meet-then-mediate disputes clause and a confidentiality clause. No restraint of trade, and no tax clause: the agreement says plainly that it does not deal with tax.

A$97 flat, no subscription. Claim Done is not a law firm; the agreement is drafted from the answers the partners give, so agree the numbers between you first.

Your next step: sit down together and agree the capital, the split, the spending limit and the exit terms, then start your Business Partnership Agreement. The draft is ready to review in about 5 minutes, and every partner reads it before anyone signs. See how it works or compare all prices.

Facts checked on 29 September 2026 against the Partnership Act 1892 (New South Wales) ss 9, 19, 24, 25, 26 and 33 (version current from 13 January 2023), Partnership Act 1958 (Victoria) ss 13, 23, 28, 30 and 37 (version 084), Partnership Act 1891 (Queensland) ss 12, 22, 27, 29 and 36, Partnership Act 1895 (Western Australia) ss 16, 29, 34, 37 and 44, Partnership Act 1891 (South Australia) ss 9, 24 and 33 (version 5.7.2018), Partnership Act 1891 (Tasmania) ss 14, 24, 29, 31 and 38, Partnership Act 1963 (Australian Capital Territory) ss 13, 23, 29, 31 and 38 (republication 11), Partnership Act 1997 (Northern Territory) ss 13, 23, 28 and 37 (as in force at 20 November 2020), and business.gov.au’s partnership page.

Frequently asked questions

What happens if business partners have no written agreement?

The Partnership Act of your state or territory fills the gaps. Subject to any agreement between the partners, all partners share equally in capital and profits and contribute equally to losses, no partner is paid for acting in the business, no new partner joins without everyone's consent, and the partnership is dissolved by the death or bankruptcy of a partner (for example, ss 24 and 33 of the Partnership Act 1892 (New South Wales)).

Are partners personally liable for the business's debts?

Yes. Each Partnership Act says every partner is liable jointly with the other partners for the debts and obligations of the firm incurred while they are a partner, and business.gov.au describes partners in a general partnership as having unlimited liability. An agreement between the partners can control how debts are created, for example with a spending limit that needs every partner's consent.

Can one partner leave without ending the partnership?

Not under the default rules for a partnership at will. Where no fixed term was agreed, a partner can end the partnership by giving notice to the others (for example, s 26 of the Partnership Act 1892 (New South Wales)). A written agreement can instead set a notice period, a way to value the leaving partner's share and a time to pay it out, so the business continues.

Does a partnership agreement need to be witnessed?

Claim Done's Business Partnership Agreement is an agreement, not a deed, and each partner signs and dates it without witness lines.

Does Claim Done's partnership agreement cover tax?

No. The agreement says plainly that it does not deal with the tax position of the partnership or any partner. business.gov.au notes that a partnership lodges its own tax return each year and each partner pays income tax on their share.