Partnership Agreements

Partnerships can be set up very informally but, where 2 people go into business without setting up a limited company, this involves significant legal and financial risks.

In simple terms a Partnership exists where a business is operated by two or more people with a view to making a profit. There are no formalities required to create a partnership. A carefully considered, practical and well-drafted partnership agreement is extremely important with an informal, unlimited liability partnership. The partners will generally be jointly and severally liable for partnership debts, one partner can potentially bind the other partners legally, and the partnership may be dissolved in certain circumstances under the Partnership Act 1890.

Reasons to choose us

• We draft, review, negotiate and update partnership agreements and advise on problems arising under partnership agreements, advising both partners and partnerships.
• Our expertise extends to broader issues such as tax. We act for many professional service firms.
• We review partnership agreements for partners joining a partnership or being promoted to partner status.
• We are able to offer meetings or telephone conference calls at relatively short notice.

Please do call us to discuss your query.  We will always scope any work and provide an estimate, giving you clarity on the likely path and legal fee costs.

Key terms in a partnership agreement

Bearing in mind the inherent personal financial risks associated with unlimited liability partnerships, it’s essential to have a clear, thorough and practical partnership agreement (typically in the form of a partnership deed) to set out rights, responsibilities, prohibitions and processes to protect all partners.

Key terms to consider and include in a partnership agreement include :

• Investment into the Partnership -  capital contributions by the partners.
• Policy on future financial contributions -  how and when the partners may be required to inject additional capital into the partnership
• Profits and losses - allocating entitlements to profits and contributions towards losses for the partners.
• Contributions to the Partnership's day-to-day business activities - setting out what each of the parties' duties are to contribute towards the partnership and possible restrictions on carrying out other work whilst a partner.
• Decision-making rights and process - how decisions are to be made about key areas such as borrowing, employing staff, entering into contracts and limits on authority, such as bank mandates.
• Exit - what happens if a partner leaves, including good leaver, bad leaver, financial balances due or owed and post-departure restrictions such as non-poaching and competition.
• New partners - Policy on expanding the partnership and the process for agreeing whether a prospective new partner can join.
• Dispute Resolution mechanism - how disputes between partners are to be dealt with and, where possible, resolved without formal proceedings.
• Illness, death or insolvency - what happens if a partner falls ill, dies, becomes insolvent, is subject to criminal proceedings or brings the partnership into serious disrepute.
• Cross-indemnities - where, if not all partners are pursued or equally pursued in terms of amount paid to the creditor for a partnership debt based on joint and several liability, any partners who have paid more towards the debt are indemnified by the others to equalise the position.

Get in contact

If you need specialist legal support for a business partnership agreement please do get in contact for a discussion and costings for legal fees associated.