What is a primary function of a partnership agreement?

A partnership agreement serves several crucial functions, but one of its primary roles is to outline the roles of each partner. By delineating responsibilities, the agreement helps to clarify what is expected from each partner, which can include decision-making authority, tasks related to the operation of the business, and the sharing of profits and losses. This clarity helps prevent disputes and misunderstandings between partners, ensuring that each individual knows their specific contributions and obligations within the partnership.

While defining the management structure of the company is important, it is a subset of the broader role of clarifying partner roles. The limitation of financial contributions can also be included in a partnership agreement, but it is not considered a primary function. Lastly, establishing a non-profit operation is a specific type of business structure and does not directly relate to the partnership agreement's fundamental purpose. Thus, outlining the roles of each partner accurately captures a key purpose of such agreements.