Uniform Partnership Act
The Uniform Partnership Act is the formal standard for defining business partnerships. The UPA states that a partnership is any business with joint ownership of its resources by two or more people. A business in which multiple people share returns or profits is also a partnership. Partnerships do not need to have incorporation documents or formal contracts between partners, although many do. This means that any time two people come together to form a business, they are becoming business partners and taking on shared responsibility for the business they form.
A partnership agreement is a formal, legally binding document that business partners sign to outline their rights, responsibilities and financial involvement in the partnership. Business partners can draft and sign any partnership agreement they wish. However, each business partner who signs is bound to the agreement's terms. New partners who join the business later may need to sign the same agreement, or the partners can redraft the partnership agreement.