What is the primary purpose of a partnership agreement?

The primary purpose of a partnership agreement is indeed to set the terms of profit sharing and liabilities. This foundational document is crucial in establishing how profits and losses will be divided among partners, which is essential for the financial operation of the partnership. It provides clarity and helps prevent disputes by specifying each partner’s financial interests, contributions, and obligations, which can vary significantly based on the specific arrangements agreed upon by the partners.

While defining roles and responsibilities of partners, establishing a corporation's legal existence, and outlining procedures for resolving disputes are important aspects of managing partnerships, they do not encompass the primary function of the partnership agreement. The agreement specifically focuses on the financial relationships and obligations, which are vital for the sustainability and governance of the partnership. Thus, the correct answer highlights the core financial and liability aspects that the partnership agreement addresses.