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Partnership agreements
People starting up in partnership often ask whether it is really necessary to have a formal partnership agreement. The answer is definitely 'Yes'.| Did you know |
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| That if you have no partnership agreement, then the Partnership Act of 1890 applies. The framework provided by the act is simple and straightforward, but does not deal with the many complications of trading a century after it was passed. |
Basically, the agreement should set out the rules governing how the partnership operates, and should cover the main ´What happens if ...´ situations. If there is no agreement, there will be a large element of uncertainty, and applying the underlying law, such as the Partnership Act 1890, may well lead to unwanted results.
It is usually best to have a partnership agreement drawn up by a solicitor, but before you reach that stage you should think about exactly what you want the agreement to cover. In particular, you should consider:
Running the business
- Partners´ duties
- Working hours and holidays
- Decision-making procedures
- Business premises
- Cars
Financial matters
- Profit-sharing arrangements, and drawings on account
- Partnership capital (and interest arrangements)
- Banking and financial arrangements
- Accounting arrangements
- Making provision for tax payments
Special circumstances
- Partner retirement procedures
- Death of a partner
- Providing for partners' retirements and dependants
- Disability of a partner
- Establishing the right to expel a partner
- Arbitration for unresolved disputes
- Business valuation procedures
Partnership basics
- Partnership agreements
- Limited liability partnerships
- The tax system for partnerships
- Raising finance for your business
