General Partnership Agreement (Texas)

GENERAL PARTNERSHIP AGREEMENT (TEXAS)

Texas-Specific Notice on Liability. Unless the partnership is registered as a Texas Limited Liability Partnership ("LLP") under Tex. Bus. Orgs. Code § 152.801 et seq., each Partner is jointly and severally liable for all obligations of the Partnership under TBOC § 152.304, and a partner is personally liable for a partnership obligation incurred while that partner is a partner. The Partners may consider LLP registration by filing an application with the Texas Secretary of State under TBOC § 152.802. An LLP must file the annual report required by § 152.806.

1. PARTIES AND FORMATION

This General Partnership Agreement ("Agreement") is made effective [__/__/____] (the "Effective Date") by and among the following Partners (each, a "Partner" and collectively, the "Partners"):

2. FORMATION UNDER TEXAS LAW

2.1 Formation. The Partners agree to associate as owners to carry on a business for profit. Under Tex. Bus. Orgs. Code § 152.051, their association to carry on that business creates a general partnership governed by Chapter 152 of the TBOC; signing this Agreement or choosing its Effective Date does not alone establish when the partnership forms. This Agreement controls to the extent allowed by TBOC § 152.002; non-waivable provisions, including the duties of loyalty and care, the obligation of good faith, and rights of third parties, apply regardless of this Agreement.

2.2 Partnership Name. "[________________________________]" (the "Partnership"). If the Partnership regularly does business under an assumed name as defined in Tex. Bus. & Com. Code § 71.002(2), it must file an assumed name certificate with the county clerk in each county specified by §§ 71.051 and 71.054.

2.3 Principal Office. [________________________________], [____] County, Texas.

2.4 LLP Election. (Check if applicable)
☐ The Partnership is registered as a Limited Liability Partnership under TBOC § 152.801 et seq., effective [__/__/____], Texas SOS File No. [________________________________]. The Partnership shall file the LLP annual report and pay the applicable fee under TBOC § 152.806; registration continues until withdrawn or terminated under § 152.802(e).

2.5 Purpose. The Partnership shall engage in: [________________________________], and any lawful activities incidental thereto.

2.6 Term. The Partnership continues at will unless dissolved under Section 10 or TBOC § 11.051/§ 152.701.

3. CAPITAL CONTRIBUTIONS AND ACCOUNTS

3.1 Initial Contributions. As set forth in the table above.

3.2 Additional Contributions. The Partners agree that no additional capital contribution is required without unanimous written consent.

3.3 No Interest; No Compensation. Under TBOC § 152.203(c), a partner is not entitled to compensation for services to the Partnership other than reasonable compensation for winding up, unless the Partners agree otherwise. The Partners agree: ☐ No compensation. ☐ Compensation as follows: [________________________________].

3.4 Capital Accounts. A capital account shall be maintained for each Partner consistent with Treas. Reg. § 1.704-1(b)(2)(iv).

4. ALLOCATIONS AND DISTRIBUTIONS

4.1 Default Rule Modified. TBOC § 152.202(c) credits each partner with an equal profit share by default and charges losses in proportion to the partner's profit share. The Partners modify this default and allocate profits and losses in accordance with their Sharing Ratios.

4.2 Distributions. Cash distributions shall be made pro rata in accordance with Sharing Ratios at such times as the Partners unanimously determine, subject to reserves for reasonably anticipated obligations.

5. MANAGEMENT AND AUTHORITY

5.1 Equal Management Right (Modified). TBOC § 152.203(a) gives each partner equal rights in management. The Partners modify this as follows:

☐ Management by all Partners equally. Each Partner has one vote regardless of Sharing Ratio; ordinary business decisions require a majority of Partners; Major Decisions (Section 5.3) require unanimous written consent.

☐ Management by Managing Partner(s). The following Partners serve as Managing Partner(s): [________________________________]. Non-managing Partners retain only the rights expressly reserved herein.

5.2 Statutory Agency Authority. Each partner is an agent of the Partnership under TBOC § 152.301. Under § 152.302(a), an act apparently in the ordinary course binds the Partnership unless the partner lacks authority and the third party knows of that lack. The Partners shall communicate any agreed limits on authority to affected third parties directly.

5.3 Major Decisions (Unanimous Written Consent).
☐ Amending this Agreement
☐ Admitting a new Partner
☐ Incurring debt exceeding $[____]
☐ Sale, lease, or mortgage of any substantial asset outside the ordinary course
☐ Merger, conversion, or dissolution
☐ Confession of judgment
☐ Commencement or settlement of litigation > $[____]
☐ Assignment of Partnership property for benefit of creditors

6. PARTNER FIDUCIARY DUTIES (TBOC §§ 152.204–152.206)

6.1 Duty of Loyalty (§ 152.205). Each Partner shall (a) account to the Partnership for any property, profit, or benefit derived from Partnership business, use of Partnership property, or a misappropriation of Partnership opportunity; (b) refrain from dealing with the Partnership as or on behalf of a party having an interest adverse to the Partnership; and (c) refrain from competing with the Partnership in the conduct of Partnership business before dissolution. These duties may not be eliminated, though the Agreement may identify specific activities that do not violate the duty if not manifestly unreasonable. TBOC § 152.002(b)(2).

6.2 Duty of Care (§ 152.206). Each Partner shall act in the conduct and winding up of Partnership business with the care an ordinarily prudent person would exercise in similar circumstances. An error in judgment alone does not breach this duty.

6.3 Good Faith (§§ 152.204(b), 152.002(b)(4)). Each Partner shall discharge duties and exercise rights in good faith and in a manner the Partner reasonably believes to be in the Partnership's best interest. The statutory obligation of good faith may not be eliminated by agreement.

7. BOOKS, RECORDS, AND INFORMATION (TBOC § 152.212)

Books shall be kept at the principal office. Each Partner has the statutory right, upon reasonable demand and without cause, to access and copy books and records, and to receive true and full information concerning Partnership affairs.

8. LIABILITY OF PARTNERS AND EXHAUSTION RULE

8.1 Joint and Several Liability (§ 152.304). Unless the Partnership has registered as a Texas LLP, all Partners are jointly and severally liable for all obligations of the Partnership.

8.2 LLP Protection (§ 152.801). While the Partnership is a limited liability partnership, a partner is not personally liable merely by partner status for an obligation incurred during that period. The shield does not affect liability imposed on the partner by law or contract independently of partner status, or the Partnership's liability from its own property. Section 152.801 does not create a separate supervision-or-direction exception.

8.3 Enforcement Against Partner Property (§ 152.306). Ordinarily, a creditor needs judgments against both the partner and the Partnership on the same claim, with the Partnership judgment remaining unsatisfied for 90 days after entry or expiration of a stay. Section 152.306(c) permits proceeding without that 90-day condition if the Partnership is in bankruptcy, the affected partner agrees, a court finds in-state Partnership property clearly insufficient or compliance excessively burdensome, or liability arises independently of partner status.

9. TRANSFER OF PARTNERSHIP INTEREST

A Partner may transfer only the right to receive distributions; admission of a new Partner requires the consent of all Partners under TBOC § 152.201. A transferee has no right to participate in management or inspect records. Any attempted transfer in violation of this Section is void.

10. PARTNER WITHDRAWAL AND WINDING UP

10.1 Events of Withdrawal (TBOC § 152.501). A Partner ceases to be a partner upon a qualifying event of withdrawal listed in § 152.501. A partner who wrongfully withdraws may be liable for damages caused by the withdrawal under § 152.503.

10.2 Continuation; Redemption. The Partnership continues after a withdrawal under § 152.502. A withdrawn Partner's interest is automatically redeemed only when § 152.601 applies, including its condition concerning a winding-up event within 61 days for withdrawals under § 152.501(b)(1)-(9). Section 152.602 ordinarily uses fair value on the withdrawal date, but sets a different measure for a qualifying wrongful withdrawal; § 152.608 may defer payment for certain wrongful withdrawals.

10.3 Events Requiring Winding Up (§§ 11.051, 11.057, 152.701). Unless this Agreement provides otherwise, a voluntary decision to wind up an at-will Partnership requires the express will of a majority-in-interest of Partners who have not assigned their interests, measured by their profit interests. Section 11.057(d) also provides a 60-day notice route for a Partner's request to wind up an at-will partnership, subject to denial by a majority-in-interest or an agreement to continue. Other winding-up events include those specified in this Agreement, statutory events, and a court decree.

10.4 Winding Up. Upon dissolution, the Partnership's affairs shall be wound up pursuant to TBOC § 152.704. The Partnership shall discharge or provide for its liabilities and obligations under TBOC § 11.053, then settle partner accounts under § 152.707, including distributions for positive capital-account balances and, subject to statutory exceptions, contributions for negative balances.

10.5 Notice of Dissolution. After dissolution, the Partners shall notify creditors and other affected third parties of the winding up as appropriate.

11. INDEMNIFICATION

The Partnership shall indemnify each Partner for payments made and liabilities incurred in the ordinary course of Partnership business, except where arising from the Partner's own breach of fiduciary duty, bad faith, intentional misconduct, or knowing violation of law. TBOC § 152.203(d) separately governs repayment, with interest, of a Partner's reasonable payments, advances, or liabilities beyond agreed contributions in the proper conduct or preservation of the business.

12. TAX MATTERS

12.1 Federal. The Partnership is a partnership for federal tax purposes. [________________________________] shall serve as Partnership Representative under IRC § 6223.

12.2 Texas Franchise Tax. Under Tex. Tax Code § 171.0002(b)(2), a general partnership is excluded from the definition of a taxable entity only if it is directly owned entirely by natural persons and its partners' liability is not limited by statute. LLP registration defeats this exclusion even if every Partner is an individual. A Partnership that is a taxable entity shall determine its franchise tax and filing obligations under Chapter 171 and current Comptroller instructions. The 2026 no-tax-due threshold is $2.65 million in annualized total revenue; being below that threshold does not by itself determine whether another report is due.

12.3 Filings. The Partnership shall file federal Form 1065, Texas franchise tax or information reports if required, Assumed Name Certificates (if applicable), and any LLP annual reports.

13. DISPUTE RESOLUTION

13.1 Governing Law. Texas law, without regard to conflicts of law.

13.2 Venue. Exclusively in the state district courts of [________________________________] County, Texas or the U.S. District Court for the [____] District of Texas.

13.3 Attorney's Fees. By contract, the prevailing Party may recover reasonable and necessary attorney's fees and costs to the extent permitted by law. Separately, Tex. Civ. Prac. & Rem. Code § 38.001(b), as amended effective September 1, 2021, permits a person to recover fees on a valid listed claim against a non-exempt individual or organization if the Chapter 38 requirements are met.

13.4 Statute of Limitations. Tex. Civ. Prac. & Rem. Code § 16.004(c) supplies a four-year period and a cessation-of-dealings accrual rule for a suit against a partner for settlement of partnership accounts; § 16.051 supplies the residual four-year period when no more specific provision applies.

13.5 Jury Waiver. EACH PARTNER KNOWINGLY AND VOLUNTARILY WAIVES THE RIGHT TO A JURY TRIAL IN ANY ACTION ARISING FROM OR RELATING TO THIS AGREEMENT.

14. MISCELLANEOUS

14.1 Entire Agreement. This Agreement, together with any Schedules, constitutes the entire agreement among the Partners.

14.2 Amendment. Amendments require a writing signed by all Partners.

14.3 Notices. By personal delivery, certified mail return receipt, or recognized overnight courier to addresses above.

14.4 Severability. Invalid provisions shall be reformed to the minimum extent necessary.

14.5 Counterparts; Electronic Signatures. Enforceable under Tex. Bus. & Com. Code Ch. 322 (Texas UETA).

15. SIGNATURES

Executed effective [__/__/____].

PARTNER 1: [________________________________]
Signature: [________________________________] Date: [__/__/____]

PARTNER 2: [________________________________]
Signature: [________________________________] Date: [__/__/____]

PARTNER 3: [________________________________]
Signature: [________________________________] Date: [__/__/____]

SOURCES AND REFERENCES

• Tex. Bus. Orgs. Code Ch. 152: https://statutes.capitol.texas.gov/Docs/BO/htm/BO.152.htm
• TBOC § 152.801 et seq. (LLP registration)
• Tex. Tax Code Ch. 171 (Franchise Tax): https://statutes.capitol.texas.gov/Docs/TX/htm/TX.171.htm
• Texas Comptroller, Franchise Tax overview: https://comptroller.texas.gov/taxes/franchise/
• Texas Secretary of State, LLP registration and forms: https://www.sos.state.tx.us/corp/llpfaqs.shtml
• Tex. Civ. Prac. & Rem. Code § 38.001 (2021 amendment)
• Ingram v. Deere, 288 S.W.3d 886 (Tex. 2009) (partnership formation factors)