Partnership Agreement Basics
In case it goes wrong
Partnership
A partnership allows two or more people to join forces and set up a business together.
The partners will share the risks and liabilities, the management and also the profits of the business.
Again, as a partner you will be personally liable for any debt of the partnership so you stand to lose not only what you have invested in the business but also any other property that you own.
You should only form a partnership with people that you trust, you will be able to work with and who will add something to your business venture. If you look for a partner merely as a source of finance, you might be better off with paying interest to a bank.
Although statutory provisions can provide you with a basic set of internal rules it is strongly recommend that you sign a partnership agreement before you start business. Some of the statutory default rules are frankly inadequate or impractical.
While legal documentation is bespoke to each SME, feedback from solicitors has identified the following areas as forming the basis for a partnership agreement:
- Business of the partnership
- Financing the business
- Contribution of assets
- Transfer of partnership interests
- Rights to take a part in management
- Rights of ‘sleeping’ partners
- Administration
- Profit distribution
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