PARTNERSHIP MEMORANDUM OF UNDERSTANDING, A STARTING TEMPLATE
Growing Partners (growingpartners.org)

This is general information, not legal advice. It is a non-binding outline of
terms two or more people discuss before signing a definitive partnership or
operating agreement, not the agreement itself; see the Partnership Agreement
or Multi-Member LLC Operating Agreement templates on this site for that. Read
Part A and Part B below before using it: Part A, the business terms, is
written to be a statement of present intent only, not an enforceable
promise, because a partnership can be formed by conduct, not by a signed
document. Two or more people who share profits and run a business together
are partners under the Uniform Partnership Act (1997), section 202, whether
or not they meant to form one and whether or not they signed anything; a
detailed memorandum that the parties then act on, by sharing revenue, opening
a joint account, or presenting themselves to customers as partners, can be
used as evidence that a partnership already exists despite what Part B says.
Keep the parties' conduct consistent with "we are still negotiating" until
the definitive agreement is signed, and have a lawyer licensed in the
parties' state review both this memorandum and the definitive agreement that
follows it.

MEMORANDUM OF UNDERSTANDING

This Memorandum of Understanding ("Memorandum") is entered into as of
[DATE], by and among [PARTY 1 NAME] and [PARTY 2 NAME] [AND ADDITIONAL
PARTIES AS NEEDED] (each a "Party" and together the "Parties").

RECITALS
The Parties are discussing forming a [GENERAL PARTNERSHIP / LLC / JOINT
VENTURE] to [DESCRIBE THE PROPOSED BUSINESS OR PROJECT], and wish to record
their current understanding of the principal terms while a definitive,
binding agreement is prepared and negotiated.

PART A: BUSINESS TERMS
The terms in this Part A are a statement of the Parties' present intent only.
As Section 8 states, none of them is a binding or enforceable obligation of
any Party, and none of them creates a partnership, joint venture or other
legal relationship, unless and until a definitive agreement is signed by all
Parties.

1. THE VENTURE
The Parties intend to [DESCRIBE THE BUSINESS PURPOSE OR PROJECT
SPECIFICALLY], under the proposed name [NAME], to be formed in [STATE].

2. PROPOSED STRUCTURE
The Parties presently intend the venture to be organized as a [GENERAL
PARTNERSHIP / LIMITED LIABILITY COMPANY / LIMITED PARTNERSHIP / JOINT
VENTURE], subject to further discussion with counsel and a tax adviser.

3. PROPOSED OWNERSHIP AND CONTRIBUTIONS
Each Party presently intends to contribute, and to hold a proposed ownership
share, as follows:
   [PARTY 1 NAME]: [PERCENTAGE]% ownership, contributing [CASH AMOUNT AND/OR
   PROPERTY, SERVICES OR IP, DESCRIBED].
   [PARTY 2 NAME]: [PERCENTAGE]% ownership, contributing [CASH AMOUNT AND/OR
   PROPERTY, SERVICES OR IP, DESCRIBED].

4. PROPOSED MANAGEMENT AND ROLES
Each Party's proposed role and area of responsibility: [DESCRIBE, E.G.
PARTY 1 NAME: OPERATIONS AND FINANCE; PARTY 2 NAME: SALES AND PRODUCT].
Major decisions are presently expected to require [UNANIMOUS CONSENT /
MAJORITY APPROVAL], to be defined in the definitive agreement.

5. PROPOSED PROFIT AND LOSS SHARING
The Parties presently intend to share profits and losses [IN PROPORTION TO
OWNERSHIP UNDER SECTION 3 / ACCORDING TO THE FOLLOWING DIFFERENT FORMULA:
[DESCRIBE AND WHY]].

6. TIMETABLE FOR THE DEFINITIVE AGREEMENT
The Parties intend to negotiate and sign a definitive, binding agreement
reflecting the terms above, as revised through negotiation, on or before
[TARGET DATE]. [OPTIONAL CONDITIONS TO THE DEFINITIVE AGREEMENT, E.G.
COMPLETION OF DUE DILIGENCE, OBTAINING FINANCING, OR A THIRD PARTY'S
CONSENT.]

7. PROPOSED FUNDING
The venture's proposed initial capital is $[AMOUNT], contributed as described
in Section 3. [PROPOSED TERMS FOR A FUTURE CAPITAL CALL, IF ANY.]

PART B: BINDING PROVISIONS
The following Sections, and only the following Sections, are binding on the
Parties from the date of this Memorandum, whether or not a definitive
agreement is ever signed.

8. NO PARTNERSHIP OR OTHER LEGAL RELATIONSHIP FORMED
Nothing in this Memorandum, including Part A, creates a partnership, joint
venture, agency or other legal relationship between or among the Parties,
and no Party has authority to act or sign for, or to bind, another Party or
the proposed venture, unless and until a definitive agreement is signed by
all Parties and, where applicable, the venture is formed under state law.
Part A is a non-binding expression of the Parties' present intent, not an
enforceable obligation, and a Party may propose, accept or reject a different
term in the definitive agreement without liability for doing so. Until the
definitive agreement is signed, the Parties shall not share revenue or
profit, operate a joint bank account, or hold themselves out to customers,
lenders or the public as partners or joint venturers.

9. EXCLUSIVITY
[OPTIONAL: For [NUMBER] days from the date of this Memorandum, no Party
shall negotiate with, or provide material non-public information about the
proposed venture to, a third party concerning an arrangement that would
compete with or replace the proposed venture.]

10. CONFIDENTIALITY
Each Party shall keep the other Parties' confidential information, and the
existence and terms of this Memorandum, confidential, and shall use it only
to evaluate and negotiate the proposed venture, for [NUMBER] years from the
date of this Memorandum, whether or not a definitive agreement is signed.

11. COSTS
Each Party bears its own costs, including legal and accounting fees, in
negotiating this Memorandum and the definitive agreement, whether or not the
definitive agreement is ever signed.

12. NO PARTNERSHIP TAX FILING OBLIGATION INTENDED
The Parties do not intend to be treated as a partnership for federal income
tax purposes under Internal Revenue Code section 761(a) unless and until a
definitive agreement is signed and the venture begins operating. The Parties
acknowledge that if they act as partners before then, including by sharing
profits or jointly operating a business, they may be found to be partners
under the Uniform Partnership Act (1997), section 202, or the state's own
partnership law, with partnership tax filing obligations, regardless of this
Section.

13. GOVERNING LAW
This Memorandum is governed by the laws of the State of [STATE].

14. TERM AND TERMINATION OF THIS MEMORANDUM
This Memorandum terminates on the earlier of: the signing of the definitive
agreement by all Parties; [OUTSIDE DATE]; or written notice from any Party
that it is withdrawing from the discussions. Sections 10 (Confidentiality)
and 11 (Costs) survive termination.

15. ENTIRE UNDERSTANDING
This Memorandum is the entire understanding of the Parties on the binding
matters in Part B and supersedes every prior discussion on those matters. No
Party may rely on Part A as a binding commitment, as establishing the terms
of the venture, or as evidence of what the definitive agreement must say.

IN WITNESS WHEREOF, the Parties have signed this Memorandum as of the date
first written above.

___________________________          ___________________________
[PARTY 1 NAME]                        [PARTY 2 NAME]
Date: ______________                  Date: ______________