Which document is essential for a contractor to establish a formal partnership agreement?

A partnership agreement is essential for establishing a formal partnership because it outlines the rights, responsibilities, and obligations of each partner involved in the business. This document serves as the foundational legal framework that governs how the partnership will operate, including decision-making processes, profit sharing, and procedures for resolving disputes. By clearly defining these elements, the partnership agreement helps to prevent misunderstandings and conflicts among partners.

In contrast, articles of incorporation are related to forming a corporation, not a partnership. Bylaws are specific to corporations and outline the governance structure and internal rules but do not pertain to partnerships. A contractor's license is necessary for legal operation in construction but does not govern the relationships or terms of partnership among contractors. Thus, the partnership agreement is the critical document needed to formalize a partnership and ensure all partners are aligned on their business arrangement.