What should a partnership agreement specify about capital contributions?

A partnership agreement should clearly specify initial and subsequent capital contributions made by the partners. This is crucial because capital contributions establish each partner's financial commitment to the partnership and can impact their ownership percentage as well as their share of profits and losses. By outlining these contributions, the agreement provides clarity for how much each partner is investing in the business at the outset and any expectations for future contributions. This helps prevent misunderstandings or disputes down the line regarding each partner's stake in the partnership.

While addressing how profits are distributed, deciding draw amounts, and insurance policies are important aspects of a partnership agreement, they do not directly relate to the essential specification of capital contributions. Capital contributions form the foundation of the financial structure of the partnership, making them a primary concern in the creation of the agreement.