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My business partner and I have formed a partnership, we are in the process of drafting our partnership agreement.

One of the points that he wants on there is:

    If one of the partners leaves they get to take half of the profit share with them 
when they do.

I disagree with this, because I feel all funds are property of the business and if they decide to leave, they can raise capital by selling their share.

He says, it allows you to pull out of the partnership at anytime as your both held responsible for profits and gains of your share. And in case of and additional agreement isnt reached is how it would be treated in court.

What are your thoughts?

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Obviously he wants to have his cake and eat it too - both get the gains and not participate in the business. If you agree with that - great. If you don't - don't. Basically, as I see it, if the partner is not active in the partnership there are two choices:

  1. Partner remains a "passive" partner, and gets his share of gains and profits without doing anything.
  2. Partner forfeits his interest if he doesn't actively participate.

Option 1 is common when the capital (money invested) is important. I.e.: the partnership based on the initial investment. That is what your partner wants.

Option 2 is common when the participation is important. I.e.: the partnership based not on the initial investment, but rather on the work done.

You would be better off with a lawyer helping you drafting the papers, but you first need to make an agreement between the partners on which of the principles applies to you, and why.

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