Partnership Agreement - General (Illinois)

GENERAL PARTNERSHIP AGREEMENT

STATE OF ILLINOIS

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This General Partnership Agreement (this "Agreement") is entered into as of [__/__/____] (the "Effective Date") by and among the undersigned parties (each, a "Partner" and collectively, the "Partners").

The Partners hereby form a general partnership (the "Partnership") pursuant to and governed by the Uniform Partnership Act (1997) as adopted in the State of Illinois under 805 ILCS 206/, and upon the terms and conditions set forth herein.

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RECITALS

A. The Partners desire to associate themselves as partners in a general partnership for the purposes described herein;

B. Each Partner has made or will make the capital contributions described on Schedule A attached hereto;

C. The Partners wish to set forth in writing their respective rights, obligations, and responsibilities with respect to the Partnership and its operations;

D. The Partnership will be formed and will operate under the laws of the State of Illinois, including 805 ILCS 206/ (Uniform Partnership Act (1997)); and

E. The Partners acknowledge that Illinois does not require the filing of formation documents with the Illinois Secretary of State to form a general partnership, but that certain optional filings (such as a Statement of Partnership Authority under 805 ILCS 206/303) and mandatory filings (such as the Illinois Personal Property Replacement Tax return) may be required.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Partners agree as follows:

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TABLE OF CONTENTS

1. Definitions
2. Formation; Name; Purpose; Term
3. Capital Contributions; Partnership Interests
4. Allocations; Distributions; Tax Matters
5. Management; Voting; Meetings
6. Representations and Warranties
7. Covenants and Restrictions
8. Books, Records, and Accounting
9. Insurance and Risk Management
10. Indemnification; Limitation of Liability
11. Transfer of Interests; Admission; Withdrawal
12. Dissociation; Dissolution; Winding Up
13. Default and Remedies
14. Dispute Resolution
15. General Provisions
16. Illinois-Specific Provisions
17. Execution

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ARTICLE 1. DEFINITIONS

For purposes of this Agreement, the following terms shall have the meanings set forth below. Defined terms appear in quotation marks or with initial capitalization throughout this Agreement.

"AAA" means the American Arbitration Association.

"Act" means the Uniform Partnership Act (1997) as adopted in the State of Illinois, codified at 805 ILCS 206/, as amended from time to time.

"Adjusted Capital Account" has the meaning assigned in Section 4.1(c).

"Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through ownership of voting securities, by contract, or otherwise.

"Agreement" has the meaning set forth in the preamble.

"Arbitration Rules" has the meaning set forth in Section 14.3.

"Business Day" means any day other than a Saturday, Sunday, or a day on which banks in the State of Illinois are authorized or required to be closed.

"Capital Account" means, for each Partner, a capital account maintained in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv) and Section 4.1(c) of this Agreement.

"Capital Contribution" means, for any Partner, the total amount of cash and the agreed fair market value of property (net of liabilities assumed or to which the property is subject) contributed to the Partnership by such Partner, as set forth on Schedule A.

"Code" means the Internal Revenue Code of 1986, as amended.

"Defaulting Partner" has the meaning set forth in Section 13.1.

"Effective Date" has the meaning set forth in the preamble.

"Fiscal Year" has the meaning set forth in Section 8.1.

"Force Majeure Event" has the meaning set forth in Section 14.5.

"IDOR" means the Illinois Department of Revenue.

"IITA" means the Illinois Income Tax Act (35 ILCS 5/).

"Illinois SOS" means the Illinois Secretary of State.

"Losses" has the meaning set forth in Section 10.1.

"Majority Interest" means Partners holding more than fifty percent (50%) of the aggregate Percentage Interests.

"Net Cash Flow" means gross cash receipts of the Partnership less all cash expenditures, debt service, reserves established by the Partners, and provision for the Partnership's Illinois Replacement Tax liability.

"Non-Defaulting Partner" has the meaning set forth in Section 13.2.

"Partner" and "Partners" have the meanings set forth in the preamble.

"Partnership" has the meaning set forth in the preamble.

"Partnership Interest" means a Partner's entire interest in the Partnership, including the right to share in profits, losses, and distributions, and the right to participate in management.

"Partnership Representative" has the meaning set forth in Section 4.4.

"Percentage Interest" means, for any Partner, the percentage set forth opposite such Partner's name on Schedule A, as amended from time to time in accordance with this Agreement.

"Person" means any individual, corporation, partnership, limited liability company, limited partnership, trust, estate, association, joint venture, governmental authority, or other entity.

"Replacement Tax" means the Illinois Personal Property Replacement Tax imposed on partnerships at a rate of 1.5% of net income under 35 ILCS 5/201(c).

"Supermajority Interest" means Partners holding at least seventy-five percent (75%) of the aggregate Percentage Interests.

"Transfer" means any sale, assignment, pledge, hypothecation, encumbrance, gift, or other disposition, whether voluntary or involuntary, by operation of law or otherwise.

"Treasury Regulations" means the regulations promulgated under the Code by the United States Department of the Treasury, as amended from time to time.

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ARTICLE 2. FORMATION; NAME; PURPOSE; TERM

2.1 Formation

The Partnership is formed as a general partnership under the laws of the State of Illinois, effective as of the Effective Date, pursuant to 805 ILCS 206/ (the Uniform Partnership Act (1997)). Under Illinois law, a general partnership does not require the filing of formation documents with the Illinois Secretary of State. A partnership is formed by the association of two or more persons to carry on as co-owners a business for profit, as provided in 805 ILCS 206/202.

2.2 Partnership Name

The Partnership shall conduct business under the name:

[________________________________]

or such other name as the Partners may unanimously approve. If the Partnership operates under an assumed name, the Partnership shall file an Assumed Business Name registration with the county clerk of each county in which the Partnership conducts business, as required by 805 ILCS 405/ (Assumed Business Name Act).

2.3 Purpose

The purpose of the Partnership is to:

[________________________________]

and to engage in any and all lawful activities incidental, necessary, or ancillary thereto, as permitted under the laws of the State of Illinois.

2.4 Principal Office

The principal office of the Partnership shall be located at:

[________________________________]
[________________________________]
[City], Illinois [____]

or at such other location within the State of Illinois as the Partners may determine from time to time.

2.5 Registered Agent

If the Partnership files a Statement of Partnership Authority or other statement with the Illinois Secretary of State, the Partnership shall designate and continuously maintain a registered agent and registered office in the State of Illinois. The initial registered agent and registered office shall be:

Name: [________________________________]
Address: [________________________________]
[________________________________]
[City], Illinois [____]

2.6 Term

The Partnership shall be a:

☐ Partnership at Will: The Partnership shall continue indefinitely until dissolved in accordance with Article 12.

☐ Partnership for a Definite Term: The Partnership shall continue for a term of [____] years from the Effective Date, unless sooner dissolved in accordance with Article 12.

☐ Partnership for a Particular Undertaking: The Partnership shall continue until the completion of [________________________________], unless sooner dissolved in accordance with Article 12.

2.7 Qualification in Other Jurisdictions

The Partnership shall qualify to do business in any other state or jurisdiction in which the nature of its business or the ownership of its property requires such qualification. The costs of qualification shall be Partnership expenses.

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ARTICLE 3. CAPITAL CONTRIBUTIONS; PARTNERSHIP INTERESTS

3.1 Initial Capital Contributions

Each Partner shall contribute the Capital Contribution set forth opposite such Partner's name on Schedule A on or before the Effective Date. The initial Capital Contributions are as follows:

Partner Name	Contribution Amount	Form of Contribution	Percentage Interest
[________________________________]	$[________________________________]	☐ Cash ☐ Property ☐ Services	[____]%
[________________________________]	$[________________________________]	☐ Cash ☐ Property ☐ Services	[____]%
[________________________________]	$[________________________________]	☐ Cash ☐ Property ☐ Services	[____]%

3.2 Additional Capital Contributions

(a) No Partner shall be required to make additional Capital Contributions without such Partner's prior written consent.

(b) If the Partnership requires additional capital as determined by a Majority Interest vote, the Partners may contribute additional capital pro rata in accordance with their respective Percentage Interests, or as otherwise unanimously agreed.

(c) Any Partner who fails to make an agreed-upon additional Capital Contribution within [____] Business Days of the due date shall be subject to the remedies set forth in Section 13.1.

(d) Additional Capital Contributions shall be reflected in an amendment to Schedule A.

3.3 Capital Accounts

A separate Capital Account shall be maintained for each Partner in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv). Each Partner's Capital Account shall be:

(a) Increased by (i) such Partner's Capital Contributions, and (ii) such Partner's allocable share of Partnership profits and income;

(b) Decreased by (i) distributions to such Partner, (ii) such Partner's allocable share of Partnership losses and deductions, and (iii) the Partner's allocable share of any Replacement Tax paid by the Partnership.

3.4 Interest on Capital

No Partner shall be entitled to receive interest on any Capital Contribution or on the balance of such Partner's Capital Account, unless otherwise unanimously agreed in writing.

3.5 Withdrawal of Capital

No Partner may withdraw any portion of its Capital Contribution without the prior written consent of all other Partners, except as expressly provided in this Agreement or upon dissolution and winding up pursuant to Article 12.

3.6 Partnership Interest as Personal Property

A Partner's Partnership Interest is personal property. No Partner has any interest in specific Partnership property. This provision is consistent with 805 ILCS 206/501.

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ARTICLE 4. ALLOCATIONS; DISTRIBUTIONS; TAX MATTERS

4.1 Allocation of Profits and Losses

(a) Net Profits. Net Profits for each Fiscal Year (or other applicable period) shall be allocated among the Partners in proportion to their respective Percentage Interests.

(b) Net Losses. Net Losses for each Fiscal Year (or other applicable period) shall be allocated among the Partners in proportion to their respective Percentage Interests; provided, however, that no Partner shall be allocated Losses to the extent such allocation would cause or increase a deficit in such Partner's Capital Account beyond the amount such Partner is obligated to restore.

(c) Substantial Economic Effect. The Partners intend that all allocations under this Article 4 satisfy the "substantial economic effect" test under Treasury Regulation Section 1.704-1(b). Capital Accounts shall be adjusted in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv).

(d) Regulatory Allocations. The following special allocations shall be made in the following order of priority before any other allocations are made:

(i) Qualified Income Offset. If any Partner unexpectedly receives an adjustment, allocation, or distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate the deficit balance in such Partner's Capital Account as quickly as possible.

(ii) Minimum Gain Chargeback. If there is a net decrease in Partnership minimum gain during any Fiscal Year, each Partner shall be allocated items of income and gain in accordance with Treasury Regulation Section 1.704-2(f).

(e) Replacement Tax Allocation. The Illinois Replacement Tax paid by the Partnership under 35 ILCS 5/201(c) shall be treated as a Partnership expense and allocated among the Partners in proportion to their respective Percentage Interests. Each Partner shall receive a credit against the Partner's Illinois individual income tax for the Partner's distributive share of Replacement Tax paid by the Partnership.

4.2 Distributions

(a) Discretionary Distributions. Net Cash Flow available for distribution shall be distributed to the Partners at such times and in such amounts as determined by a Majority Interest vote, pro rata in accordance with their respective Percentage Interests.

(b) Minimum Tax Distributions. The Partners shall use reasonable efforts to distribute, at least annually, sufficient cash to enable each Partner to satisfy its federal and Illinois individual income tax obligations attributable to its share of Partnership income (the "Tax Distribution"). Tax Distributions shall be computed using the highest combined marginal federal and Illinois individual income tax rate applicable to any Partner, taking into account the credit for Replacement Tax paid by the Partnership.

(c) Distributions in Kind. No Partner may demand or receive distributions in kind without the unanimous consent of all Partners.

(d) Withholding. The Partnership may withhold from distributions any amounts required to be withheld under federal, Illinois, or other applicable tax law.

4.3 Tax Elections

(a) The Partnership shall make the following elections for federal income tax purposes, unless the Partners otherwise unanimously agree:

☐ Election under Code Section 754 to adjust the basis of Partnership property upon a transfer of a Partnership Interest or a distribution of property

☐ Election to amortize organizational expenses under Code Section 709(b)

☐ Other elections as determined by the Partnership Representative

(b) The Partnership shall elect the calendar year as its taxable year unless a different year is required or permitted under the Code.

4.4 Partnership Representative

(a) [________________________________] is hereby designated as the "Partnership Representative" within the meaning of Code Section 6223 (as amended by the Bipartisan Budget Act of 2015).

(b) The Partnership Representative shall have the authority to act on behalf of the Partnership in any federal or Illinois tax audit or proceeding and to make all decisions regarding such matters, including the decision to elect out of the centralized partnership audit regime under Code Section 6221(b), if eligible.

(c) The Partnership Representative shall keep all Partners informed of the status of any tax audit or proceeding and shall not settle any tax matter without the prior written consent of a Majority Interest.

(d) If the Partnership is eligible, the Partnership Representative shall, at the written request of a Majority Interest, make the election under Code Section 6226 to "push out" any imputed underpayment to the Partners.

4.5 Tax Returns

(a) The Partnership Representative shall cause the Partnership's federal and Illinois tax returns to be prepared and timely filed. The Partnership shall file:

(i) Federal Form 1065 (U.S. Return of Partnership Income);
(ii) Illinois Form IL-1065 (Partnership Replacement Tax Return); and
(iii) Any other required state or local tax returns.

(b) Each Partner shall be furnished with a federal Schedule K-1 and Illinois Schedule K-1-P within [____] days after the close of each Fiscal Year, or such earlier date as may be required by law.

(c) Illinois Form IL-1065 is due on or before the 15th day of the 4th month following the close of the Partnership's tax year (April 15 for calendar-year partnerships).

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ARTICLE 5. MANAGEMENT; VOTING; MEETINGS

5.1 Management

(a) The Partners shall manage the Partnership collectively. Unless otherwise specified in this Agreement, all decisions relating to the ordinary course of business shall require the approval of a Majority Interest.

(b) Each Partner's voting power shall be proportional to such Partner's Percentage Interest.

5.2 Major Decisions

The following actions (each, a "Major Decision") shall require the unanimous written consent of all Partners:

(a) Amendment or modification of this Agreement;

(b) Admission of a new Partner;

(c) Sale, exchange, lease, or other disposition of all or substantially all of the Partnership's assets outside the ordinary course of business;

(d) Merger, conversion, or consolidation of the Partnership with or into another entity (pursuant to 805 ILCS 206/Article 9);

(e) Voluntary dissolution of the Partnership;

(f) Incurrence of indebtedness exceeding $[________________________________] individually or $[________________________________] in the aggregate;

(g) Any transaction between the Partnership and a Partner or an Affiliate of a Partner;

(h) Filing a Statement of Partnership Authority with the Illinois Secretary of State pursuant to 805 ILCS 206/303;

(i) Filing a petition for bankruptcy or making an assignment for the benefit of creditors;

(j) Change in the nature of the Partnership's business;

(k) Acquisition of real property;

(l) Election to pay Pass-Through Entity Tax under 35 ILCS 5/; and

(m) Entry into any agreement that cannot be terminated within twelve (12) months without penalty.

5.3 Meetings

(a) Any Partner may call a meeting of the Partners upon at least five (5) Business Days' written notice to all Partners, stating the date, time, place, and purpose of the meeting.

(b) Meetings may be held in person, by telephone conference, or by video conference, provided that all participating Partners can hear and communicate with each other.

(c) The Partners shall hold at least one (1) annual meeting within ninety (90) days after the close of each Fiscal Year to review financial performance, approve tax returns, and address other Partnership business.

5.4 Quorum

Partners holding a Majority Interest, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting.

5.5 Action Without Meeting

Any action that may be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action taken is signed by Partners holding the requisite Percentage Interest for such action.

5.6 Managing Partner

(a) The Partners may, by Majority Interest vote, appoint one or more managing Partners (each, a "Managing Partner") to conduct the day-to-day operations of the Partnership.

(b) A Managing Partner shall serve at the pleasure of the Partners and may be removed at any time by a Majority Interest vote.

(c) Unless specifically authorized in writing by unanimous consent, a Managing Partner shall not have the authority to take any Major Decision.

(d) Initial Managing Partner: [________________________________] ☐ Not applicable

5.7 Officers

The Partners may appoint officers (including a President, Secretary, and Treasurer) to carry out designated functions. Officers shall serve at the pleasure of the Partners and shall have such authority as the Partners may delegate.

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ARTICLE 6. REPRESENTATIONS AND WARRANTIES

Each Partner represents and warrants to the other Partners as of the Effective Date and as of each date on which such Partner acquires an additional Partnership Interest:

6.1 Authority and Capacity

Such Partner (a) if an individual, is at least eighteen (18) years of age and has full legal capacity; (b) if an entity, is duly organized, validly existing, and in good standing under the laws of its jurisdiction of formation and is authorized to do business in the State of Illinois; and (c) has full right, power, and authority to execute and deliver this Agreement and to perform its obligations hereunder.

6.2 No Conflict

The execution, delivery, and performance of this Agreement by such Partner does not and will not (a) violate any law, regulation, court order, or decree applicable to such Partner; (b) conflict with or result in a breach of any agreement, instrument, or obligation to which such Partner is a party or by which such Partner is bound; or (c) require the consent or approval of any third party that has not been obtained.

6.3 Investment Intent

Such Partner is acquiring its Partnership Interest for its own account, for investment purposes only, and not with a view to distribution or resale in violation of applicable securities laws, including the Illinois Securities Law of 1953 (815 ILCS 5/).

6.4 Sophistication and Independent Advice

Such Partner (a) is sophisticated in business and financial matters; (b) has had the opportunity to consult independent legal, tax, and financial advisors regarding this Agreement and the transactions contemplated hereby; and (c) has conducted its own due diligence and is not relying on any representation or warranty of any other Partner or the Partnership other than those expressly set forth in this Agreement.

6.5 Disclosure

Such Partner has not withheld from the other Partners any material fact or information relating to this Agreement or the Partnership's business that would be material to a reasonable Partner's decision to enter into this Agreement.

6.6 Compliance with Laws

Such Partner is in compliance with all applicable laws, rules, and regulations, including all Illinois licensing and permit requirements applicable to the Partnership's business.

6.7 Survival

The representations and warranties set forth in this Article 6 shall survive the execution and delivery of this Agreement and shall continue in full force and effect for the duration of the Partnership.

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ARTICLE 7. COVENANTS AND RESTRICTIONS

7.1 Compliance with Laws

The Partnership and each Partner shall comply in all material respects with all applicable federal, state, and local laws, rules, and regulations, including all Illinois-specific requirements under 805 ILCS 206/ and any applicable county, municipal, or home-rule unit ordinances.

7.2 Duty of Loyalty and Care

(a) Each Partner owes to the Partnership and the other Partners the duty of loyalty as described in 805 ILCS 206/404(b), including (i) to account to the Partnership and hold as trustee any property, profit, or benefit derived in the conduct and winding up of the Partnership business or from a use by the Partner of Partnership property, including the appropriation of a Partnership opportunity; (ii) to refrain from dealing with the Partnership in the conduct or winding up of the Partnership business as or on behalf of a party having an interest adverse to the Partnership; and (iii) to refrain from competing with the Partnership in the conduct of the Partnership business before the dissolution of the Partnership.

(b) Each Partner owes to the Partnership and the other Partners the duty of care described in 805 ILCS 206/404(c), which is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

(c) Each Partner shall discharge duties consistently with the obligation of good faith and fair dealing under 805 ILCS 206/404(d).

7.3 Non-Competition

During the term of the Partnership and for a period of [____] months following a Partner's dissociation or the dissolution of the Partnership, no Partner shall, directly or indirectly, engage in, own, manage, operate, control, finance, or participate in any business that is competitive with the Partnership's business within the following geographic area:

[________________________________]

This restriction may be waived or modified by unanimous written consent of all Partners. Illinois enforces non-competition covenants under the Illinois Freedom to Work Act (820 ILCS 90/) and common law; restrictive covenants must be supported by adequate consideration and be reasonable in scope, duration, and geographic area.

7.4 Confidentiality

(a) Each Partner shall maintain the confidentiality of all proprietary, financial, and business information of the Partnership ("Confidential Information") and shall not disclose such information to any third party without the prior written consent of a Majority Interest, except as required by law, regulation, or court order.

(b) Confidential Information does not include information that (i) is or becomes publicly available through no fault of the receiving Partner; (ii) is already in the receiving Partner's possession without restriction; or (iii) is independently developed by the receiving Partner without reference to Confidential Information.

(c) Illinois recognizes the Illinois Trade Secrets Act (765 ILCS 1065/) for the protection of trade secrets; Partnership Confidential Information qualifying as a trade secret shall receive the full protection afforded under that statute.

(d) The obligations under this Section 7.4 shall survive the dissolution of the Partnership and the withdrawal or dissociation of any Partner for a period of [____] years.

7.5 Non-Solicitation

During the term of the Partnership and for a period of [____] months following a Partner's withdrawal or dissociation, no Partner shall solicit or attempt to solicit any employee, contractor, customer, or client of the Partnership for the purpose of competing with the Partnership. The Illinois Freedom to Work Act (820 ILCS 90/) limits non-solicitation and non-competition agreements for employees earning below certain thresholds; the Partners shall ensure compliance with such limitations.

7.6 Notice of Material Matters

Each Partner shall promptly notify the other Partners in writing of: (a) any material breach or threatened breach of this Agreement; (b) any material adverse change in the Partnership's business, properties, or financial condition; (c) any threatened or pending litigation or governmental investigation involving the Partnership; and (d) any event that could reasonably be expected to result in the dissociation or dissolution of the Partnership.

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ARTICLE 8. BOOKS, RECORDS, AND ACCOUNTING

8.1 Fiscal Year

The fiscal year of the Partnership (the "Fiscal Year") shall end on [________________________________] of each year.

8.2 Books and Records

(a) The Partnership shall maintain complete and accurate books of account and other records at its principal office, using the ☐ cash ☐ accrual method of accounting, consistently applied.

(b) The books and records shall include, at a minimum:

(i) A current list of the names, addresses, and Percentage Interests of all Partners;

(ii) Copies of this Agreement and all amendments thereto;

(iii) Copies of all federal and Illinois tax returns (including IL-1065) for the three (3) most recent Fiscal Years;

(iv) Financial statements for the three (3) most recent Fiscal Years;

(v) Records of Capital Contributions and distributions;

(vi) Minutes of all Partner meetings and records of all actions taken by written consent; and

(vii) All records required to be maintained under 805 ILCS 206/403.

8.3 Inspection Rights

Each Partner, and such Partner's designated representatives, may, at such Partner's expense and upon reasonable written notice, inspect, examine, and copy the Partnership's books and records during normal business hours. This right is consistent with the rights provided under 805 ILCS 206/403.

8.4 Financial Reports

The Partnership shall provide to each Partner:

(a) Within ninety (90) days after the close of each Fiscal Year, annual financial statements (including a balance sheet, income statement, and statement of cash flows), prepared in accordance with generally accepted accounting principles ("GAAP") or such other method as the Partners may agree;

(b) Within thirty (30) days after the close of each calendar quarter, unaudited quarterly financial statements; and

(c) Such other reports and information as any Partner may reasonably request.

8.5 Bank Accounts

(a) All Partnership funds shall be deposited in bank accounts in the name of the Partnership at financial institutions selected by a Majority Interest vote.

(b) Withdrawals and expenditures exceeding $[________________________________] shall require the signature of at least [____] Partner(s).

(c) No Partnership funds shall be commingled with the personal funds of any Partner.

8.6 Independent Accountant

The Partners may engage an independent certified public accountant to audit or review the Partnership's financial statements on an annual basis. The cost of such engagement shall be a Partnership expense.

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ARTICLE 9. INSURANCE AND RISK MANAGEMENT

9.1 Required Insurance Policies

The Partnership shall obtain and maintain, at its expense, the following insurance policies with commercially reasonable terms and coverage limits:

(a) Commercial General Liability Insurance: Coverage of not less than $[________________________________] per occurrence and $[________________________________] annual aggregate;

(b) Property Insurance: Coverage for the full replacement value of the Partnership's tangible property;

(c) Professional Liability/Errors and Omissions Insurance: ☐ Required ☐ Not applicable -- If required, coverage of not less than $[________________________________] per claim;

(d) Workers' Compensation Insurance: As required by the Illinois Workers' Compensation Act (820 ILCS 305/), if the Partnership has employees;

(e) Commercial Automobile Insurance: ☐ Required ☐ Not applicable -- If required, coverage of not less than $[________________________________] per occurrence;

(f) Business Interruption Insurance: ☐ Required ☐ Not applicable;

(g) Umbrella/Excess Liability Insurance: ☐ Required ☐ Not applicable -- If required, coverage of not less than $[________________________________].

9.2 Additional Insured

Each Partner shall be named as an additional insured on all Partnership liability insurance policies, where commercially feasible.

9.3 Risk Mitigation

The Partnership shall implement and maintain appropriate risk management policies and procedures consistent with industry standards and applicable Illinois law.

9.4 Claims and Notices

Each Partner shall promptly notify the Partnership and all other Partners of any incident, claim, or potential claim that may give rise to an insurance claim or liability of the Partnership.

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ARTICLE 10. INDEMNIFICATION; LIMITATION OF LIABILITY

10.1 Mutual Indemnification

Each Partner (the "Indemnifying Partner") shall indemnify, defend, and hold harmless the other Partners, the Partnership, and their respective officers, agents, and employees from and against any and all losses, damages, liabilities, claims, judgments, costs, and expenses, including reasonable attorneys' fees and court costs (collectively, "Losses"), arising out of or relating to:

(a) Any breach by the Indemnifying Partner of any representation, warranty, covenant, or obligation under this Agreement;

(b) The Indemnifying Partner's gross negligence, willful misconduct, or fraud; or

(c) The Indemnifying Partner's knowing violation of any applicable law.

10.2 Partnership Indemnification

The Partnership shall, to the fullest extent permitted by the Act and Illinois law, indemnify each Partner against Losses incurred by reason of such Partner's status as a Partner or such Partner's actions taken in good faith on behalf of the Partnership, provided that such Partner's conduct did not constitute gross negligence, willful misconduct, fraud, or a knowing violation of law.

10.3 Advance of Expenses

The Partnership shall advance expenses (including reasonable attorneys' fees) incurred by a Partner in defending any action, suit, or proceeding for which indemnification may be sought under this Article 10, upon receipt of a written undertaking by such Partner to repay such amounts if it is ultimately determined that such Partner is not entitled to indemnification.

10.4 Limitation of Liability

(a) No Partner shall be liable to the Partnership or any other Partner for monetary damages except for (i) fraud; (ii) willful misconduct; (iii) a knowing violation of law; or (iv) liability from which the Partners may not be relieved under 805 ILCS 206/404.

(b) In no event shall any Partner's aggregate liability under this Agreement exceed:

☐ $[________________________________] (the "Liability Cap")
☐ Such Partner's Capital Contribution
☐ Unlimited (no cap)

(c) IN NO EVENT SHALL ANY PARTNER BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE, OR EXEMPLARY DAMAGES, REGARDLESS OF WHETHER SUCH DAMAGES ARE FORESEEABLE OR WHETHER SUCH PARTNER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, EXCEPT IN THE CASE OF FRAUD OR WILLFUL MISCONDUCT.

10.5 Exculpation

No Partner shall be personally liable for any honest mistake of judgment or for any action or inaction taken in good faith reliance upon the advice of the Partnership's legal counsel, accountants, or other professional advisors, or upon any report, financial statement, or other data believed in good faith to be accurate.

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ARTICLE 11. TRANSFER OF INTERESTS; ADMISSION; WITHDRAWAL

11.1 Restrictions on Transfer

(a) No Partner may Transfer all or any portion of its Partnership Interest without:

(i) The prior written consent of Partners holding at least [____]% of the non-transferring Percentage Interests;

(ii) Compliance with all applicable federal, state (including the Illinois Securities Law of 1953, 815 ILCS 5/), and local securities laws;

(iii) Delivery to the Partnership of a written opinion of counsel (reasonably satisfactory to the Partnership) that such Transfer is exempt from registration under applicable securities laws; and

(iv) Execution by the transferee of a joinder agreement substantially in the form of Schedule C.

(b) Any purported Transfer in violation of this Section 11.1 shall be void and of no effect.

11.2 Right of First Refusal

(a) If a Partner (the "Offering Partner") receives a bona fide written offer from a third party to acquire all or any portion of its Partnership Interest (the "Third-Party Offer"), the Offering Partner shall provide written notice to the other Partners (the "ROFR Notice"), including a copy of the Third-Party Offer, within five (5) Business Days of receipt.

(b) The other Partners shall have thirty (30) days from receipt of the ROFR Notice to elect, individually or collectively, to purchase the Offering Partner's Interest on the same terms and conditions as the Third-Party Offer.

(c) If the other Partners do not elect to exercise their right of first refusal within such thirty (30) day period, the Offering Partner may consummate the Transfer to the third party on terms no more favorable to the third party than those set forth in the Third-Party Offer, subject to the consent requirement of Section 11.1(a)(i).

11.3 Permitted Transfers

Notwithstanding Section 11.1, a Partner may Transfer its Partnership Interest without the consent of the other Partners to:

(a) A revocable living trust established by and for the benefit of such Partner;

(b) A family member of such Partner (spouse, child, or grandchild); or

(c) An entity wholly owned and controlled by such Partner;

provided that the transferee executes a joinder agreement and agrees to be bound by all terms and conditions of this Agreement.

11.4 Admission of New Partners

New Partners may be admitted to the Partnership only with the unanimous written consent of all existing Partners and upon execution of a joinder agreement substantially in the form of Schedule C.

11.5 Withdrawal

(a) A Partner may voluntarily withdraw from the Partnership upon not less than ninety (90) days' prior written notice to all other Partners (the "Withdrawal Notice").

(b) Upon withdrawal, the withdrawing Partner's interest shall be purchased by the remaining Partners or the Partnership at fair market value, as determined in accordance with Section 11.6.

11.6 Valuation

(a) Fair market value of a withdrawing, dissociated, or deceased Partner's interest shall be determined by mutual agreement of the parties within thirty (30) days of the triggering event.

(b) If the parties cannot agree on fair market value, it shall be determined by an independent appraiser selected by the parties or, if they cannot agree on an appraiser, by the AAA in accordance with its rules.

(c) The cost of the appraisal shall be borne equally by the parties.

(d) Payment of the purchase price shall be made in cash, or upon such other terms as the parties may agree, within [____] days of the final valuation determination.

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ARTICLE 12. DISSOCIATION; DISSOLUTION; WINDING UP

12.1 Events of Dissociation

A Partner is dissociated from the Partnership upon the occurrence of any of the following events, as described in 805 ILCS 206/601:

(a) The Partnership's receiving notice of the Partner's express will to withdraw as a Partner, effective on the date of notice or a later date specified therein;

(b) An event agreed to in this Agreement as causing the Partner's dissociation;

(c) The Partner's expulsion pursuant to this Agreement;

(d) The Partner's expulsion by unanimous vote of the other Partners if:
(i) It is unlawful to carry on business with that Partner;
(ii) There has been a transfer of all or substantially all of that Partner's transferable interest (other than a Permitted Transfer); or
(iii) The Partner is an entity and, within ninety (90) days after its dissolution, its business has not been wound up;

(e) The Partner's expulsion by judicial decree under 805 ILCS 206/601(5);

(f) The Partner's death (if an individual) or the appointment of a guardian or general conservator;

(g) The Partner becoming a debtor in bankruptcy; or

(h) Any other event specified in 805 ILCS 206/601.

12.2 Effect of Dissociation

Upon a Partner's dissociation:

(a) The dissociated Partner's right to participate in management and conduct the Partnership's business terminates, consistent with 805 ILCS 206/603;

(b) The dissociated Partner's duty of loyalty under Section 7.2(a)(i) and (ii) terminates;

(c) The dissociated Partner's duties of loyalty and care continue only with respect to matters arising before the dissociation; and

(d) The remaining Partners may elect to continue the Partnership's business by purchasing the dissociated Partner's interest in accordance with Section 11.6.

12.3 Dissolution Events

The Partnership shall dissolve upon the first to occur of the following events, as described in 805 ILCS 206/801:

(a) In a partnership at will, the Partnership's receiving notice of a Partner's express will to withdraw, unless within ninety (90) days after the dissociation, a majority in interest of the remaining Partners agree to continue the Partnership's business;

(b) In a partnership for a definite term or particular undertaking:
(i) Within ninety (90) days after a Partner's dissociation by death or as otherwise described in 805 ILCS 206/601(6) through (10), or wrongful dissociation under 805 ILCS 206/602(b), the express will of at least half of the remaining Partners to wind up the Partnership's business;
(ii) The express will of all Partners to wind up the Partnership's business; or
(iii) The expiration of the term or completion of the undertaking;

(c) An event that makes it unlawful for all or substantially all of the Partnership's business to be continued (but a cure within ninety (90) days of the event shall be effective retroactively);

(d) On application by a Partner, a judicial determination that the economic purpose of the Partnership is likely to be unreasonably frustrated, that a Partner has engaged in conduct relating to the Partnership that makes it not reasonably practicable to carry on business with that Partner, or that it is not otherwise reasonably practicable to carry on the Partnership business in conformity with this Agreement; or

(e) Unanimous written consent of all Partners to dissolve.

12.4 Statement of Dissolution

(a) Upon dissolution, the Partnership shall file a Statement of Dissolution with the Illinois Secretary of State in accordance with 805 ILCS 206/805.

(b) A filed Statement of Dissolution cancels any previously filed Statement of Partnership Authority.

(c) A person not a Partner is deemed to have notice of the dissolution ninety (90) days after the Statement of Dissolution is filed with the Illinois Secretary of State.

12.5 Winding Up

(a) Upon dissolution, the Partners who have not wrongfully dissociated (or, if none, a court-appointed representative) shall wind up the Partnership's affairs in accordance with 805 ILCS 206/803.

(b) During winding up, the Partnership shall:

(i) Collect all debts and obligations owing to the Partnership;

(ii) Sell, liquidate, or distribute Partnership assets in an orderly manner;

(iii) Pay or make reasonable provision for all Partnership obligations and liabilities in the following order of priority:

• First, to creditors, including Partners who are creditors, to the extent permitted by law;
• Second, payment of any outstanding Illinois Replacement Tax liability;
• Third, to Partners and former Partners in satisfaction of liabilities for distributions owed;
• Fourth, to Partners for the return of their Capital Contributions; and
• Fifth, to Partners in accordance with their positive Capital Account balances.

(c) The Partnership shall file all necessary tax returns (federal and Illinois, including a final IL-1065) for the final tax year and any short period.

12.6 Continuation After Dissolution

At any time after dissolution and before winding up is completed, all of the Partners (including any dissociated Partner other than a wrongfully dissociated Partner) may waive the right to have the Partnership wound up and terminated. In that event, the Partnership resumes carrying on business as if dissolution had never occurred.

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ARTICLE 13. DEFAULT AND REMEDIES

13.1 Events of Default

A "Default" occurs if a Partner (the "Defaulting Partner"):

(a) Materially breaches any provision of this Agreement and fails to cure such breach within thirty (30) days after written notice from any other Partner specifying the nature of the breach;

(b) Fails to make a required Capital Contribution within fifteen (15) days after written notice of such failure;

(c) Becomes insolvent or files a voluntary petition for bankruptcy, or an involuntary petition for bankruptcy is filed against such Partner and is not dismissed within sixty (60) days;

(d) Makes an assignment for the benefit of creditors;

(e) Engages in fraud, embezzlement, or criminal conduct relating to the Partnership's business;

(f) Violates the non-competition or confidentiality covenants in Article 7; or

(g) Is convicted of a felony or any crime of moral turpitude that could materially harm the Partnership's business or reputation.

13.2 Remedies

Upon the occurrence of a Default, the non-defaulting Partners ("Non-Defaulting Partners") may, individually or collectively, pursue any one or more of the following remedies:

(a) Suspension of Rights. Suspend the Defaulting Partner's voting and management rights during the continuance of the Default;

(b) Forced Buyout. Purchase the Defaulting Partner's Partnership Interest at a price equal to the lesser of (i) the fair market value (as determined under Section 11.6) and (ii) the book value of such interest, less any damages suffered by the Partnership as a result of the Default;

(c) Expulsion. Expel the Defaulting Partner by unanimous vote of the Non-Defaulting Partners, subject to the provisions of Section 12.1;

(d) Damages. Recover actual damages from the Defaulting Partner;

(e) Offset. Offset any distributions otherwise payable to the Defaulting Partner against amounts owed by the Defaulting Partner to the Partnership; and

(f) Other Remedies. Pursue any other remedies available at law or in equity.

13.3 Attorneys' Fees

In any action or proceeding to enforce this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees, costs, and expenses from the non-prevailing party, including fees incurred on appeal.

13.4 Cumulative Remedies

The remedies set forth in this Article 13 are cumulative and are in addition to any other remedies available under this Agreement, at law, or in equity. No exercise of any remedy shall constitute a waiver of any other remedy.

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ARTICLE 14. DISPUTE RESOLUTION

14.1 Negotiation

The Partners shall first attempt in good faith to resolve any dispute, controversy, or claim arising out of or relating to this Agreement, or the breach, termination, or invalidity thereof (a "Dispute"), by direct negotiation. The disputing Partners shall meet (in person or by video conference) within fifteen (15) days of written notice of a Dispute and shall negotiate in good faith for a period of not less than thirty (30) days.

14.2 Mediation

If a Dispute is not resolved through negotiation within thirty (30) days, the Partners shall submit the Dispute to non-binding mediation administered by the AAA (or another mediation service agreed upon by the Partners) in [________________________________], Illinois, before resorting to arbitration. The cost of mediation shall be shared equally among the disputing Partners.

14.3 Mandatory Arbitration

If a Dispute is not resolved through mediation within sixty (60) days (or such longer period as the Partners may agree), the Dispute shall be submitted to final and binding arbitration administered by the AAA under its Commercial Arbitration Rules then in effect (the "Arbitration Rules"). The arbitration shall be conducted as follows:

(a) Seat. The seat of arbitration shall be [________________________________], Illinois.

(b) Arbitrator. The tribunal shall consist of one (1) arbitrator with at least ten (10) years of experience in partnership or commercial disputes, selected in accordance with the Arbitration Rules.

(c) Award. The arbitrator shall issue a reasoned written award. The arbitrator shall have the authority to award compensatory damages, specific performance, and injunctive relief, but shall not award punitive or exemplary damages.

(d) Confidentiality. The arbitration proceedings and the award shall be confidential.

(e) Costs. The arbitrator shall have the authority to allocate the costs of arbitration (including the arbitrator's fees and administrative fees) between the parties.

14.4 Injunctive Relief; Exclusive Jurisdiction

(a) Notwithstanding Sections 14.1 through 14.3, any Partner may seek temporary, preliminary, or permanent injunctive relief or specific performance in the state or federal courts located in [________________________________] County, Illinois (the "Exclusive Jurisdiction Courts"), and each Partner irrevocably submits to the exclusive jurisdiction of such courts for such purpose.

(b) Each Partner waives any objection to venue or forum non conveniens in the Exclusive Jurisdiction Courts.

14.5 Force Majeure

Neither the Partnership nor any Partner shall be liable for failure to perform any obligation under this Agreement (other than the obligation to make Capital Contributions or distributions) caused by events beyond reasonable control, including natural disasters (floods, tornadoes, severe winter storms), war, terrorism, epidemics, pandemics, labor disputes, governmental actions, or utility failures (each, a "Force Majeure Event"), provided that:

(a) The affected party gives prompt written notice to the other Partners describing the Force Majeure Event and its expected duration;

(b) The affected party uses commercially reasonable efforts to mitigate the effects of the Force Majeure Event and resumes performance as soon as reasonably practicable; and

(c) If the Force Majeure Event continues for more than [____] consecutive days, the non-affected Partners may elect to dissolve the Partnership.

14.6 Jury Trial Waiver

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTNER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE PARTNERSHIP, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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ARTICLE 15. GENERAL PROVISIONS

15.1 Amendments

This Agreement may be amended, modified, or supplemented only by a written instrument executed by all Partners. No oral modification shall be effective.

15.2 Waiver

No failure or delay by any Partner in exercising any right, power, or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof. All waivers must be in writing and signed by the waiving Partner.

15.3 Entire Agreement; Integration

This Agreement (including all Schedules hereto) constitutes the entire agreement among the Partners with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or written, among the Partners.

15.4 Severability

If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect. The invalid provision shall be reformed to the minimum extent necessary to make it valid and enforceable while preserving the original intent of the Partners.

15.5 Successors and Assigns

This Agreement shall be binding upon and shall inure to the benefit of the Partners and their respective heirs, executors, administrators, successors, and permitted assigns.

15.6 Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, including 805 ILCS 206/ (the Uniform Partnership Act (1997)), without giving effect to any choice-of-law or conflict-of-law rules that would cause the application of the laws of any other jurisdiction.

15.7 Notices

All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed duly given upon:

(a) Personal delivery;

(b) The next Business Day if sent by nationally recognized overnight courier;

(c) Three (3) Business Days after deposit in the United States mail, postage prepaid, certified or registered mail, return receipt requested; or

(d) The date sent by confirmed electronic mail (email), provided that a copy is sent by another method described above within two (2) Business Days.

Notices shall be addressed to each Partner at the address set forth on Schedule A, or at such other address as a Partner may designate by written notice in accordance with this Section.

15.8 Counterparts; Electronic Signatures

This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Signatures delivered by electronic means (including PDF, DocuSign, or other electronic signature platform) shall be binding and effective, in accordance with the Illinois Electronic Commerce Security Act (5 ILCS 175/).

15.9 Interpretation

(a) Headings and captions are for convenience of reference only and shall not affect the interpretation of this Agreement.

(b) "Including" means "including without limitation."

(c) References to "Sections," "Articles," or "Schedules" are to sections, articles, and schedules of this Agreement unless otherwise specified.

(d) Words in the singular include the plural and vice versa. Words of one gender include any gender.

(e) In the event of any conflict between the body of this Agreement and any Schedule, the body of this Agreement shall control.

15.10 No Third-Party Beneficiaries

Except as expressly provided herein, nothing in this Agreement is intended to or shall confer upon any Person other than the Partners any rights, benefits, or remedies of any kind or nature whatsoever.

15.11 Creditors

No creditor of any Partner shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies against, the property of the Partnership, except through a charging order as provided by 805 ILCS 206/504.

15.12 Further Assurances

Each Partner shall execute and deliver such further documents and instruments, and take such further actions, as may be reasonably necessary to effectuate the purposes of this Agreement.

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ARTICLE 16. ILLINOIS-SPECIFIC PROVISIONS

16.1 Governing Statute

This Partnership is governed by the Uniform Partnership Act (1997) as adopted in Illinois, codified at 805 ILCS 206/. Illinois adopted its version of the Revised Uniform Partnership Act effective January 1, 1998. In the event of any conflict between this Agreement and the Act, the terms of this Agreement shall control to the extent permitted by the Act. For provisions of the Act that cannot be varied by agreement (as specified in 805 ILCS 206/103(b)), the Act shall control.

16.2 Statement of Partnership Authority

(a) Pursuant to 805 ILCS 206/303, the Partnership may file a Statement of Partnership Authority with the Illinois Secretary of State. A Statement of Partnership Authority may state:

(i) The name of the Partnership;
(ii) The street address of the Partnership's chief executive office and of one office in Illinois, if there is one;
(iii) The names and mailing addresses of all Partners or of an agent appointed and maintained by the Partnership;
(iv) The names of Partners authorized to execute instruments transferring real property held in the name of the Partnership; and
(v) A grant of authority, or limitation on the authority, of some or all of the Partners.

(b) A grant of authority to a Partner to enter into transactions on behalf of the Partnership is effective as to third parties. However, a grant of authority to transfer real property held in the name of the Partnership that is filed with the Illinois Secretary of State and recorded with the recorder of the county in which the real property is located is conclusive in favor of a person who gives value without knowledge to the contrary.

(c) The decision to file a Statement of Partnership Authority shall be a Major Decision requiring unanimous consent.

16.3 Filings with the Illinois Secretary of State

(a) Various statements may be filed with the Illinois Secretary of State under 805 ILCS 206/, including:

• Statement of Partnership Authority (805 ILCS 206/303)
• Statement of Denial (805 ILCS 206/304)
• Statement of Dissociation (805 ILCS 206/704)
• Statement of Dissolution (805 ILCS 206/805)
• Statement of Merger (805 ILCS 206/907)
• Statement of Qualification (805 ILCS 206/1001, for LLP election)
• Amendments or cancellations of any filed statement

(b) Documents or reports transmitted for filing electronically must include the name of the person making the submission, which constitutes the affirmation or acknowledgment under penalties of perjury that the instrument is the act and deed of the person or entity (805 ILCS 206/105(c)).

(c) Filing Contact Information:
Illinois Secretary of State
Department of Business Services
501 S. Second Street, Suite 328
Springfield, Illinois 62756
Phone: (217) 782-6961

Chicago Office:
69 W. Washington Street, Suite 1240
Chicago, Illinois 60602
Phone: (312) 793-3380

Website: https://www.ilsos.gov

16.4 Assumed Business Name

If the Partnership conducts business under a name other than the surnames of all Partners, the Partnership shall register the assumed business name with the county clerk of each county in which the Partnership conducts business, pursuant to 805 ILCS 405/ (Assumed Business Name Act). In Cook County, this registration is filed with the Cook County Clerk.

16.5 Illinois Tax Obligations -- Personal Property Replacement Tax

(a) Replacement Tax. Illinois imposes a Personal Property Replacement Tax (PPRT) on partnerships at a rate of 1.5% of the Partnership's net income allocable to Illinois, pursuant to 35 ILCS 5/201(c). This is an entity-level tax paid by the Partnership itself, not the individual Partners. The Replacement Tax replaced revenue lost by local governments when their power to impose personal property taxes was eliminated by the 1970 Illinois Constitution.

(b) Filing Requirement. The Partnership shall file Illinois Form IL-1065 (Partnership Replacement Tax Return) with the Illinois Department of Revenue. The return is due on or before the 15th day of the 4th month following the close of the Partnership's tax year (April 15 for calendar-year partnerships).

(c) Estimated Payments. Partnerships are generally required to pay the Replacement Tax annually and are not required to make estimated payments unless the Partnership elects to pay the Pass-Through Entity Tax (PTE Tax). However, if the Partnership elects to pay PTE Tax and can reasonably expect its combined Replacement Tax and PTE Tax liability to exceed $500, quarterly estimated payments are required on the 15th day of the 4th, 6th, 9th, and 12th months of the tax year.

(d) Investment Partnership Exemption. Effective for tax years ending on or after December 31, 2004, a partnership that qualifies as an "investment partnership" as defined in the IITA shall not be subject to the Replacement Tax.

(e) Credit for Replacement Tax. Each Partner is entitled to a credit against the Partner's Illinois individual income tax for the Partner's distributive share of Replacement Tax paid by the Partnership. The Partnership shall provide each Partner with the information necessary to claim this credit.

(f) Illinois Schedule K-1-P. The Partnership shall furnish each Partner with an Illinois Schedule K-1-P showing the Partner's share of income, deductions, credits, and Replacement Tax.

16.6 Illinois Income Tax -- Partner-Level Obligations

(a) No Additional Entity-Level Income Tax. Illinois does not impose an income tax on partnerships at the entity level beyond the Replacement Tax described in Section 16.5. Individual Partners are subject to Illinois individual income tax (currently a flat rate of 4.95% under 35 ILCS 5/201(b)(5.7)) on their distributive share of Partnership income.

(b) Pass-Through Entity Tax (PTE Tax) Election. Illinois enacted a Pass-Through Entity Tax (PTE Tax) election allowing qualifying partnerships and S corporations to pay income tax at the entity level (at a rate of 4.95% on the net income of the entity). Partners may then claim a credit on their individual returns. The decision to make or revoke the PTE Tax election shall be a Major Decision. (35 ILCS 5/201(p))

(c) Nonresident Partner Withholding. The Partnership may be required to withhold Illinois income tax on the income of nonresident Partners, or the nonresident Partners may file agreements to file Illinois returns.

16.7 Cook County and Chicago Considerations

If the Partnership operates in Cook County or the City of Chicago, the following additional considerations apply:

(a) Chicago Head Tax: (Note: The Chicago head tax was repealed effective January 1, 2014. Verify current status of any successor obligations.)

(b) City of Chicago Business License. Depending on the Partnership's business, the Partnership may need to obtain a Chicago business license or limited business license from the City of Chicago Department of Business Affairs and Consumer Protection.

(c) Cook County Assumed Name Registration. If using an assumed business name, the Partnership must register with the Cook County Clerk's office.

(d) Cook County Taxes. Cook County has the highest effective property tax rates in Illinois. The Partnership should account for Cook County property tax obligations on any real or personal property located within the county.

(e) Chicago Municipal Code Compliance. The Partnership must comply with all applicable provisions of the Municipal Code of the City of Chicago, including zoning, building code, and anti-discrimination ordinances (the Chicago Human Rights Ordinance, MCC Ch. 2-160).

16.8 Illinois-Specific Dissolution Requirements

(a) Upon dissolution, a Partner who has not wrongfully dissociated may file a Statement of Dissolution with the Illinois Secretary of State pursuant to 805 ILCS 206/805.

(b) A filed Statement of Dissolution cancels any previously filed Statement of Partnership Authority.

(c) A person not a Partner is deemed to have notice of the dissolution ninety (90) days after the Statement of Dissolution is filed.

(d) The Partnership shall file a final IL-1065 (Replacement Tax Return) for the short tax year ending on the date of dissolution or final winding up.

16.9 Illinois Freedom to Work Act

The Illinois Freedom to Work Act (820 ILCS 90/) restricts the enforceability of non-competition and non-solicitation agreements:

(a) Non-competition covenants are prohibited for employees earning $75,000 or less annually (increasing by $5,000 every five years);

(b) Non-solicitation covenants are prohibited for employees earning $45,000 or less annually (increasing by $2,500 every five years);

(c) While these thresholds apply to employees rather than equity Partners, the Partners should ensure that any restrictive covenants in this Agreement are reasonable and comply with Illinois law and public policy.

16.10 Mandatory Provisions Under 805 ILCS 206/103

The Partners acknowledge that 805 ILCS 206/103(b) provides that the partnership agreement may not:

(a) Vary the rights and duties under 805 ILCS 206/105 except to impose reasonable restrictions on the availability and use of information;

(b) Unreasonably restrict the right of access to books and records under 805 ILCS 206/403;

(c) Eliminate the duty of loyalty under 805 ILCS 206/404(b), although the Partners may identify specific types of activities that do not violate such duty if not manifestly unreasonable;

(d) Unreasonably reduce the duty of care under 805 ILCS 206/404(c);

(e) Eliminate the obligation of good faith and fair dealing under 805 ILCS 206/404(d); or

(f) Vary the power to dissociate as a Partner under 805 ILCS 206/602(a), except to require written notice in a specified form.

16.11 Tax Agency Contact Information

Illinois Department of Revenue:
Willard Ice Building
101 W. Jefferson Street
Springfield, Illinois 62702
Phone: (217) 782-3336
Toll-Free: (800) 732-8866
Website: https://tax.illinois.gov

Chicago Office:
James R. Thompson Center
100 W. Randolph Street, Suite 7-900
Chicago, Illinois 60601

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ARTICLE 17. EXECUTION

IN WITNESS WHEREOF, the undersigned Partners have executed this General Partnership Agreement as of the Effective Date first written above.

Partner Signature Blocks

PARTNER 1:

Name: [________________________________]
Title (if entity): [________________________________]

Signature: _____________________________________________

Date: [__/__/____]

Address: [________________________________]
[________________________________]
[City], Illinois [____]

Email: [________________________________]
Phone: [________________________________]

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PARTNER 2:

Name: [________________________________]
Title (if entity): [________________________________]

Signature: _____________________________________________

Date: [__/__/____]

Address: [________________________________]
[________________________________]
[City], Illinois [____]

Email: [________________________________]
Phone: [________________________________]

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PARTNER 3 (if applicable):

Name: [________________________________]
Title (if entity): [________________________________]

Signature: _____________________________________________

Date: [__/__/____]

Address: [________________________________]
[________________________________]
[City], Illinois [____]

Email: [________________________________]
Phone: [________________________________]

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Notary Acknowledgment

STATE OF ILLINOIS
COUNTY OF [________________________________]

On this [____] day of [________________], 20[____], before me, a Notary Public in and for the State of Illinois, personally appeared:

[________________________________]
[________________________________]
[________________________________]

personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument, the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Notary Public Signature: _____________________________________________

Print Name: [________________________________]

My Commission Expires: [__/__/____]

Notary Public, State of Illinois

[NOTARY SEAL]

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SCHEDULE A

PARTNERS; CAPITAL CONTRIBUTIONS; PERCENTAGE INTERESTS

No.	Partner Name	Mailing Address	Initial Capital Contribution	Form of Contribution	Percentage Interest
1	[________________________________]	[________________________________]	$[________________________________]	☐ Cash ☐ Property ☐ Services	[____]%
2	[________________________________]	[________________________________]	$[________________________________]	☐ Cash ☐ Property ☐ Services	[____]%
3	[________________________________]	[________________________________]	$[________________________________]	☐ Cash ☐ Property ☐ Services	[____]%

Total Capital Contributions: $[________________________________]

Total Percentage Interests: 100%

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SCHEDULE B

ADDITIONAL TERMS AND SPECIAL ALLOCATIONS

[________________________________]

(Use this Schedule to document any special profit/loss allocation arrangements, guaranteed payments, special distribution priorities, or other economic terms that differ from the standard pro rata allocations described in Article 4.)

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SCHEDULE C

FORM OF JOINDER AGREEMENT

JOINDER TO GENERAL PARTNERSHIP AGREEMENT

The undersigned (the "Joining Partner") hereby agrees, as of [__/__/____] (the "Joinder Date"), to become a Partner of [________________________________] (the "Partnership") and to be bound by all terms and conditions of that certain General Partnership Agreement dated [__/__/____], as amended (the "Agreement").

The Joining Partner acknowledges that it has received and reviewed a complete copy of the Agreement and all Schedules thereto.

Capital Contribution: $[________________________________]
Percentage Interest: [____]%
Form of Contribution: ☐ Cash ☐ Property ☐ Services

The Joining Partner makes the representations and warranties set forth in Article 6 of the Agreement as of the Joinder Date.

JOINING PARTNER:

Name: [________________________________]
Title (if entity): [________________________________]

Signature: _____________________________________________

Date: [__/__/____]

Address: [________________________________]
[________________________________]

ACCEPTED AND AGREED BY EXISTING PARTNERS:

Partner Name	Signature	Date
[________________________________]	_________________________	[__/__/____]
[________________________________]	_________________________	[__/__/____]
[________________________________]	_________________________	[__/__/____]

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SCHEDULE D

PARTNERSHIP PROPERTY

The following property is hereby contributed to or acquired by the Partnership as of the Effective Date:

Description of Property	Contributing Partner	Agreed Value	Encumbrances
[________________________________]	[________________________________]	$[________________________________]	[________________________________]
[________________________________]	[________________________________]	$[________________________________]	[________________________________]

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This General Partnership Agreement has been prepared as a template for informational purposes only. It does not constitute legal advice. The laws governing partnerships in Illinois, including 805 ILCS 206/, are subject to change. All parties should consult with a qualified attorney licensed to practice in the State of Illinois before executing this or any similar agreement. Tax provisions should be reviewed by a qualified tax advisor familiar with Illinois tax law, including the Personal Property Replacement Tax (1.5% on partnership net income) and the Illinois Income Tax Act. Partnerships operating in Cook County or the City of Chicago should also review applicable local requirements.

Template provided by ezel.ai -- Last Updated: 2026-02-27