Partnerships Agreements
Partnerships Agreements
A partnership agreement must be between two or more people conducting a business with the intention of making a profit.
Partnership agreements don’t have to be put into writing, they can be more informal. Regardless of the setup of the partnership, the Partnership Act 1890 governs the rights and responsibilities of those involved.
Partnership Rights
The following list is a brief summary of the main rights of partners as set out by the aforementioned act;
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Managing the business - Every partner can take part in the running and management of the business.
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Profit Sharing - All partners are entitled to share equally in the profits of the business and will be expected to contribute equally to any losses.
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Partnership pay – There is no automatic entitlement for any partner to be paid for acting in the partnership business.
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Partnership duration – If the partnership doesn’t have an agreed fixed duration then it can be brought to an end by one of the partners who must give notice to the others involved.
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Personal liability - The partners are entitled to be reimbursed by the business for any personal liability suffered in carrying out the normal business activities or maintaining the premises from where the partnership works.
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Advances - A partner is entitled to interest at the rate of 5% per annum on any additional advance made to the business outwith the original partnership agreement.
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New partners - No new partners can join the partnership without the consent of all the existing partners.
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Partnership changes - No change can be made to the nature of the partnership business without the consent of all the existing partners.
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Books - The partnership books should be kept at the principal place of business of the partnership where every partner can access them.
If you’re thinking of entering into a partnership agreement it’s advisable to get legal advice at the start so that everyone involved is absolutely clear of the rights they have and what’s expected of them.
Partnership agreements have the potential to get bogged down in disagreements over how the business is run and its future direction, which is another reason to find a legal practitioner in this field who you can rely on for expert advice.
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