Did you know?
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 more than a century after it was enacted.
Your 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 undesirable 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:
- Partners' duties
- Working hours and holidays
- Decision-making procedures
- Business premises
- 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, disability or death of a partner
- Establishing the right to expel a partner
- Arbitration for unresolved disputes
- Business valuation procedures