Are you starting or have you started a business with a partner? Then a Partnership Agreement is something you should definitely consider.
Do you need a partnership agreement?
Without a specific agreement being drawn up, your business partnership will be governed by the laws laid down in the Partnership Act of 1890. This Act makes a number of assumptions including that all partners are equal, that each partner has the full authority to do anything in the partnership’s name, and that any partner can dissolve the partnership at any time. You have a modern business and should have operate under arrangements that are bespoke to you rather than by 19th century laws.
The default provisions of the Act do not therefore offer any real security or protection for partners or the business in general and each of them may find themselves liable for the acts of another partner without any obvious recourse.
A partnership agreement can specify arrangements for the continuation the business if one partner leaves, and set out an understanding of their respective roles and authority to make certain decisions.
What are the advantages?
A partnership agreement gives all partners security and a written agreement of how the business will be run. It demonstrates that all partners have the best interests of the business and its growth at heart.
A partnership agreement can be used to determine the share of profits which need not be equal but can better reflect the respective time, effort and resources than they are putting in. so a partnership agreement can help to distribute profits more fairly. As with profits, the Act determines that all partners share in the liabilities of the business equally. However, a partnership agreement can allow the partners to determine some other ratios in which they will share liability for debts of the business.
Agreements can also help to save huge amounts of money in legal proceedings, should disputes arise between business partners if it is felt that a partner is ‘not pulling their weight’ or is demanding more than their true entitlement on leaving the business.
We can help!
Each and every business is unique, so an “off the shelf” package just won’t capture everything that is important. A bespoke or tailored agreement will suit you much better, and this is something that our Commercial lawyers are experts in putting together. We’ve done it countless other times, and ensured the smooth running of businesses and straightforward resolutions of partnership problems when they have arisen.