Partnership agreement: a guide for partners

Starting a business with a partner is one of the most common ways to build a business in Denmark. But the absence of a clear partnership agreement is also one of the most frequent reasons that businesses and friendships break down.

A partnership agreement (kompagniskabskontrakt), also called a general partnership agreement or partner agreement, is the legal foundation of any partner relationship. It sets the rules before a disagreement arises: who owns what, who decides what, and what happens if one partner wants out?

This guide covers what you should know about partnership agreements in 2026: what applies as background law, what you should include voluntarily, and which classic mistakes can cost you dearly.

What is a partnership agreement?

A partnership agreement is a written agreement between two or more parties who own and run a business together. It defines:

• Ownership: who owns which share of the business?
• Capital contributions: what did each partner contribute at the start?
• Management and decision-making: who can bind the business? Is unanimity required?
• Profit sharing: how are profits and losses distributed?
• Division of work: what is each person's role and responsibility?
• Exit terms: what happens if a partner wants to sell or withdraw?

The agreement is especially important in general partnerships (I/S), where all partners are liable personally, without limit and jointly for the business's obligations. Here the internal agreement is often the only protection against the partner's debt.

General partnership vs. private limited company: which structure is right?

Many partners today choose to set up a private limited company (ApS) rather than a general partnership (I/S), precisely because an ApS limits personal liability. But partnership agreements are relevant in both structures:

	General partnership (I/S)	Private limited company (ApS)
Liability	Personal, unlimited, joint	Limited to the contribution
Registration	Not required for individually owned I/S (but a CVR number is needed for VAT-liable activity)	Required at the Danish Business Authority
Minimum capital	None	DKK 20,000
Contract	Partnership agreement	Shareholders' agreement and articles
Flexibility	High	Moderate (framework of the Companies Act)

In an ApS the shareholders' agreement replaces the partnership agreement as the central document between the owners, but the function is the same: to govern the relationship between the owners beyond what the articles and the Companies Act require.

What should a partnership agreement contain?

1. The business's identity and purpose

The name, CVR number (if registered), address and a description of the business's activities. The purpose should be described broadly enough to accommodate future growth, but specifically enough to delimit what the partnership covers.

2. The partners' capital contributions

State the size and form of each contribution (cash, assets, work). Has a partner contributed know-how or work rather than capital? Document it here, and state the agreed valuation.

3. Ownership shares and profit sharing

Specify the precise ownership share for each partner (for example 60%/40%). Profit sharing does not have to match the ownership share, so state it explicitly. Remember to address whether certain partners have a salary claim in addition to a share of the profit.

4. Management and authority to bind

Who can bind the business (that is, enter into binding agreements on the business's behalf)? Is it all partners jointly, or can each act independently up to an amount limit?

Recommendation: Require a joint signature for material decisions (loans, investments above a certain amount, hiring, new partners).

5. Decision rules

Which decisions require unanimity, and which can be made by a simple majority? Typical unanimity requirements:

• Admitting new partners
• Changing ownership shares
• Merger, demerger or liquidation
• Taking out loans above a set limit
• Amending the partnership agreement itself

6. Competition and loyalty

Can the partners run a competing business on the side? What are the rules for secondary occupation? A non-compete clause in the partnership agreement is often sensible, but note that it must be reasonable and limited to be enforceable.

7. Confidentiality

Partners have access to the business's most sensitive information. Include a confidentiality clause that survives withdrawal from the partnership, and state explicitly that customer relationships and trade secrets are confidential.

8. Exit provisions (the most important part)

This is the partnership agreement's most critical section, because it governs what happens when the relationship ends. Consider:

Right of first refusal: if a partner wants to sell their share, the others have a right of first refusal. Specify the procedure and the pricing mechanism (for example an independent auditor's valuation).

Tag-along right: if a majority owner sells to a third party, the minority owner has the right to sell on the same terms.

Drag-along right: if the majority wants to sell the whole business, they can require the minority to join on the same terms.

Goodwill on withdrawal: what is the value of the share and the goodwill, and who sets it? Avoid leaving this to future negotiation, and set the method now.

Death and incapacity: what happens if a partner dies or becomes permanently unable to work? Is the share inherited, or must it be bought out?

9. Dissolution and liquidation

When can the partnership be dissolved? Is unanimity required, or can one partner require dissolution? In what order are creditors satisfied on liquidation?

Classic mistakes in partnership agreements

Mistake 1: no contract at all

The most frequent mistake. Without a written agreement, the default (dispositive) background rules apply, and they rarely fit the specific partner relationship. The rules for general partnerships are not gathered in a single act but follow from contract law and case law, and they work as a fallback, not as a tailored set of rules.

Mistake 2: vague wording on decision-making

"We decide things together" is not a rule; it is a time bomb. What happens in a disagreement? Who has the deciding vote?

Mistake 3: no exit terms

Partners often overlook the exit provisions because they do not want to think about the negative outcome. But precisely because it is uncomfortable to discuss, it is important to settle while the relationship is good.

Mistake 4: ownership shares agreed orally

Oral agreements are hard to prove and easy to dispute. Ownership shares must appear clearly in a written contract.

Mistake 5: the contract is not updated

Businesses change. A contract from the start-up phase may not reflect the current owners' situation, role or capital contribution. Revise the contract when something significant changes.

Partnership agreement vs. shareholders' agreement

If you run a private limited company, what you need is a shareholders' agreement, not a classic partnership agreement. The shareholders' agreement governs the relationship between the shareholders and supplements the articles of association.

Functionally they cover the same needs: ownership shares, decision rules and exit terms. But the shareholders' agreement is adapted to the framework of the Companies Act and can, for example, contain clauses on capital increases and dividend policy that are irrelevant in a general partnership.

Partnership agreement: is it required by law?

No, there is no obligation to have a written partnership agreement in Denmark. But without a written agreement it is extremely difficult to prove what was agreed, and the background law is rarely satisfactory.

When should an I/S be registered? General partnerships that run a commercial, VAT-liable business must have a CVR number. If all partners are limited-liability companies (for example ApS companies), the partnership must in addition be registered under the Act on Certain Commercial Undertakings. For individually owned I/S, registration beyond the CVR number is as a rule voluntary, but it gives legal clarity about the ownership structure.

Frequently asked questions about partnership agreements

Can you make a partnership agreement if you are already up and running?

Yes, it is never too late. A later agreement is far better than no agreement. Use the opportunity to settle the unresolved points while the relationship is constructive.

What happens if a partner does not pay their contribution?

The contract should govern this: what is the consequence of a missing contribution? Typically the other partners can assert breach, and the defaulting partner's share can be adjusted or bought out under the contract's rules.

Can I remove a partner who does not contribute?

It depends on the contract. Without an explicit basis it is difficult. Include a clause on breach of the duty to work with a right to buy out the share on repeated inactivity.

What does it cost to have a lawyer draw up a partnership agreement?

A simple contract typically costs a few thousand kroner at a lawyer. With a template you can prepare the basis yourself for a fraction of the price and supplement with legal advice if there are complex circumstances.

Is an oral partnership agreement binding?

Yes, oral agreements are in principle binding, but enormously hard to prove. Any court will struggle to establish precise ownership shares and terms without written documentation.

Getting started with your partnership agreement

A solid partnership agreement is not a sign of distrust in your partner. It is a sign of professional cooperation. The clearer the rules from the start, the more energy you can spend on building the business.

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The content of this article is for guidance only and does not constitute legal advice. Consult a lawyer for advice on your specific situation.