Can this covenant be signed electronically?

Yes. Electronic signatures are generally enforceable under the ESIGN Act (15 U.S.C. ch. 96) and UETA in most states, provided the signers show intent, consent, attribution, and the record is retained. Certain narrow exceptions (e.g., some wills) do not apply to partnership covenants.

Is notarization required for validity?

Not typically. Most partnership covenants do not require notarization to be binding, but notarization or witness signatures may be advisable for real property transfers or when third parties (banks, registrars) request authenticated documents.

Who should sign the covenant on behalf of an entity?

Authorized signatories should sign for entities based on internal authority: officers for corporations, managers for LLCs, or trustees for trusts. Confirm authority with formation documents and attach a certified resolution if requested.

What happens if a partner dies or becomes incapacitated?

The covenant should specify succession or buyout procedures; absent provisions, default state law and fiduciary rules apply. Include disability, death, and incapacity triggers with valuation and funding mechanics.

How do we change the covenant later?

Follow the amendment clause: typically a written amendment signed by the required partners. For material changes, legal and tax review is recommended to avoid unintended tax consequences.

Where should signed originals be stored?

Keep executed originals with the partnership custodian or registered agent; retain digital copies in an encrypted, tamper-evident archive that supports reproduction and audit trails for the retention period.

Electronic Signature
Templates
Miscellaneous
Business Partnership Covenant

Business Partnership Covenant

This template is fully customizable. Edit the text, fill out the fields, and send it for signature. Give it a try!

Business Partnership Covenant

This Business Partnership Covenant (the "Covenant") is made and entered into as of by and between:

Party A - Legal Name Party A - Address Party B - Legal Name Party B - Address

Recitals

WHEREAS, Party A and Party B desire to form a cooperative partnership for the purpose of and to define their respective rights, duties, capital contributions, profit sharing and governance procedures;

WHEREAS, Party A will contribute and Party B will contribute to the partnership, and both parties intend to share profits and losses as set forth below;

WHEREAS, the parties desire to reduce their understanding to this Covenant to govern the partnership relationship between them.

Scope of Work

The partnership shall undertake the following activities and services. The parties agree that the partnership will carry out the business consistent with prudent industry practice and in accordance with the responsibilities allocated herein.

Detailed Scope of Work

Payment Terms

The parties agree the partnership compensation structure and payment allocation shall be as follows.

Total Partnership Consideration / Budget Payment Schedule and Allocation

Late payments shall incur a late fee equal to % of the overdue amount per billing cycle, plus reasonable costs of collection, and interest thereafter at the maximum rate permitted by applicable law.

Term and Termination

This Covenant shall commence on and shall continue in effect until unless earlier terminated in accordance with this section.

Either party may terminate this Covenant for convenience upon days' prior written notice to the other party. Termination for cause shall be permitted where a material breach is not cured within days after written notice specifying the breach. Upon termination, parties shall promptly settle outstanding obligations and return confidential materials as required herein.

Confidentiality

Each party acknowledges that, in connection with the partnership, it may receive or develop Confidential Information of the other party. "Confidential Information" means non-public business, technical or financial information that is designated as confidential or that reasonably should be understood to be confidential given the nature of the information and the circumstances of disclosure. Each party agrees to: (a) hold the Confidential Information in strict confidence; (b) use the Confidential Information solely to perform obligations under this Covenant; and (c) not disclose Confidential Information to any third party except to employees, agents or advisors with a need to know and who are bound by substantially similar confidentiality obligations.

The obligations in this section shall survive termination of this Covenant for a period of years, except to the extent applicable law requires otherwise.

Acknowledgment of Mutual Confidentiality

Party A acknowledges and accepts the confidentiality obligations.
Party B acknowledges and accepts the confidentiality obligations.

Governing Law

This Covenant shall be governed by and construed in accordance with the laws of the State of without regard to its conflict of laws principles. Any dispute arising under or in connection with this Covenant shall be resolved in the courts of that state or by arbitration if the parties mutually agree in writing.

Entire Agreement; Miscellaneous

This Covenant, including all exhibits and written schedules, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, proposals and communications, whether written or oral. No amendment or waiver of any provision of this Covenant shall be effective unless in writing and signed by both parties. If any provision of this Covenant is held to be invalid or unenforceable, the remaining provisions shall remain in full force and effect.

The parties shall not assign or transfer their rights or obligations under this Covenant without the prior written consent of the other party, except that a party may assign to a successor in interest in connection with a merger, sale of substantially all assets, or transfer of all or substantially all of its partnership interest.

Party A - Print Name:

By:

Date:

Party B - Print Name:

By:

Date:

What the Business Partnership Covenant Is

A Business Partnership Covenant is a written agreement that establishes the rights, duties, financial commitments, decision-making rules, and exit procedures among business partners. It typically covers capital contributions, profit and loss allocation, management authority, voting thresholds, dispute resolution, confidentiality, and dissolution mechanics. While not always required by statute, a clear covenant reduces uncertainty between partners and provides an enforceable record of agreed obligations under contract law and applicable state statutes.

Why a Covenant Matters for Partners

A formal covenant clarifies expectations, allocates risk, and creates contractual remedies for breaches. It helps prevent disputes, supports financing or investor review, and documents governance for third parties such as banks or courts.

Who Typically Uses a Partnership Covenant

Use is most valuable when partners want predictable governance, clear dispute-resolution paths, and documented sign-off on financial obligations.

Small business cofounders agreeing on capital, roles, and vesting schedules.
Professional partnerships (services) allocating profit shares and client responsibilities.
Family or closely held businesses documenting succession and buyout rules.

Core Components to Include in the Covenant

A professional Business Partnership Covenant groups essential provisions so partners can quickly find governance rules, financial terms, and exit mechanics. Well-structured covenants reduce ambiguity and support enforcement.

Parties

Identify each partner by full legal name, business entity type, and address; include legal entity identifiers where applicable and specify capacity (individual, trustee, corporation).

Capital & Contributions

Document initial capital, future contribution obligations, valuation method for noncash contributions, capital account treatment, and consequences for missed contributions.

Profit and Loss

Specify allocation percentages or formula, tax treatment (partnership tax allocations), timing of distributions, and limitations on distributions for reserves or liabilities.

Management & Voting

Define day-to-day authority, reserved matters requiring unanimous or supermajority votes, voting thresholds, meeting cadence, and quorum rules.

Transfers & Buyouts

Set transfer restrictions, right of first refusal, valuation method for buyouts (appraisal, formula), and permitted transferees (family, affiliates).

Dispute & Exit

Include mediation/arbitration clauses, dissolution triggers, winding-up procedures, confidentiality obligations, and noncompete/non-solicitation limits where enforceable.

Step-by-Step: Completing a Business Partnership Covenant

Follow these sequential steps to draft, review, and execute the covenant so it accurately reflects partner intent and legal formalities.

01

Draft Terms: Collect material items: capital, roles, profit splits, and voting rules.
02

Legal Review: Have counsel review for compliance with state law and tax consequences.
03

Signature Preparation: Add signature blocks, dates, and any notary or witness sections needed.
04

Execute & Distribute: Obtain signatures, retain originals, and provide copies to all partners and accountants.

Required Information Typically Included

Partner Names: Full legal names

Entity Details: Entity type and formation state

Capital Terms: Initial and future contributions

Allocation: Profit and loss percentages

Governance: Voting and management rules

Exit Terms: Buyout and dissolution mechanics

Where to File or Send the Executed Covenant

Understand where executed copies should be retained and when a covenant must be recorded or provided to third parties.

Original Retention: Keep the executed original with the partnership’s custodian or registered agent.
Financial Parties: Provide copies to banks or lenders upon request; include executed signature page.
Tax Advisors: Share with accountants for accurate partnership tax filings.
Public Record: Most covenants are private; only record if required by local statute or if tied to real property.

Digital Signing and eSubmission Considerations

Ensure the chosen platform supports ESIGN/UETA compliance, secure storage, and any industry-specific controls you need.

Authentication: Email, SMS code, or advanced methods
Audit Trail: Timestamps, IP, and action history
File Formats: PDF and DOCX supported

How to Customize and Complete the Covenant Online

Typical online workflow settings you’ll configure when assembling and sending the covenant for signature.

Field	Configuration
Signer Order	Sequential or parallel routing
Authentication	Email link, SMS code, or ID verification
Required Fields	Make signatures, dates, and capital amounts mandatory
Retention	Enable secure archive and export options

Comparing eSignature Vendors for Covenant Execution

Vendor pricing and core features that affect how you prepare and execute partnership covenants; signNow is listed first per vendor comparison guidance.

	signNow	DocuSign	Adobe Sign	PandaDoc	HelloSign
Starting Price	$8/user/mo	$15/user/mo	$14/user/mo	$19/user/mo	$15/user/mo
Free Trial	7-day free trial, no credit card	Varies	Varies	Varies	Varies
Bulk Send	Yes	Yes	Yes	Yes	Limited
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes	Yes	Yes	No	No
Envelope Cap	No cap	100 envelopes/user/year	Varies	Varies	Varies

Common Mistakes to Avoid When Preparing a Covenant

Vague contribution language that leaves valuation methods undefined, creating disputes if a partner contributes noncash assets without a valuation mechanism.
Failing to specify voting thresholds or deadlock procedures, which can stall decision-making and lead to costly litigation or forced dissolution.
Not aligning tax allocations with IRS rules; improper allocation of profits or losses can trigger audits and penalties under IRC provisions.
Skipping a clear amendment process; without a written amendment clause, informal changes can create enforceability challenges and internal conflict.

Risks and Legal Consequences of an Incomplete or Incorrect Covenant

Contract Disputes: Breach claims

Tax Exposure: IRS adjustments

Personal Liability: Unintended partner liability

Enforcement Costs: Litigation expenses

Regulatory Penalties: Industry fines

Operational Disruption: Business interruptions

How to Update or Amend an Existing Covenant

Use a controlled amendment process to ensure changes are valid and documented for future enforcement and tax reporting.

01

Propose Change:

Document proposed alteration and reasons.

02

Partner Approval:

Collect required votes per amendment clause.

03

Draft Amendment:

Prepare a written amendment signed by partners.

04

Notarize if Needed:

Add notary or witness where state or bank requires.

05

Distribute Copies:

Provide updated executed copies to partners and advisors.

06

Archive:

Store prior and current versions with retention metadata.

Frequently Asked Questions About the Business Partnership Covenant

Answers to common questions about using, signing, and storing a Business Partnership Covenant, with practical guidance for partners and advisors.

Need help? Contact support

Can this covenant be signed electronically?
Yes. Electronic signatures are generally enforceable under the ESIGN Act (15 U.S.C. ch. 96) and UETA in most states, provided the signers show intent, consent, attribution, and the record is retained. Certain narrow exceptions (e.g., some wills) do not apply to partnership covenants.
Is notarization required for validity?
Not typically. Most partnership covenants do not require notarization to be binding, but notarization or witness signatures may be advisable for real property transfers or when third parties (banks, registrars) request authenticated documents.
Who should sign the covenant on behalf of an entity?
Authorized signatories should sign for entities based on internal authority: officers for corporations, managers for LLCs, or trustees for trusts. Confirm authority with formation documents and attach a certified resolution if requested.
What happens if a partner dies or becomes incapacitated?
The covenant should specify succession or buyout procedures; absent provisions, default state law and fiduciary rules apply. Include disability, death, and incapacity triggers with valuation and funding mechanics.
How do we change the covenant later?
Follow the amendment clause: typically a written amendment signed by the required partners. For material changes, legal and tax review is recommended to avoid unintended tax consequences.
Where should signed originals be stored?
Keep executed originals with the partnership custodian or registered agent; retain digital copies in an encrypted, tamper-evident archive that supports reproduction and audit trails for the retention period.

be ready to get more

Join over 28 million airSlate SignNow users

Sign Now