Legal Advice on and Preparation of Partnership Agreements

Partnership Agreements

A partnership is a business venture whereby the business is run by a number of joint owners. The owners (or partners) of the partnership have responsibility for running the business between them and decisions, profits, losses, and liabilities are all shared amongst them. A partnership is automatically formed when more than two people decide to work together for the benefit of making money. Therefore it is vital that the relationship between the partners, their responsibilities, their profit sharing, and their obligations are all properly recorded. This is done through a Partnership Agreement, and Hewetts have a great deal of experience preparing bespoke partnership agreements for newly-started or existing businesses, as well as advising on already-existing Agreements. We are based in Reading but operate a national service.

For Initial Free Advice Call Oliver Kew on 0118 955 9612


Partnerships are commonly associated with professionals such as accountants, doctors and solicitors, but any business can be defined as a partnership if it so wishes. Because so many decisions within the partnership are dependant on some or all of the other partners agreeing, conflicts often arise between the people running the business. A lot of these conflicts lead to partnerships failing which is why a partnership agreement, detailing the exact nature and conditions of the relationship everyone is entering into, can be vital to keeping the business running.

There are two main types of partnership, both of which Hewetts can advise on:

Full Partnership

As explained above. Full partnerships have between two and twenty partners. They are subject to the Partnership Act 1890, which will govern all partnerships in the absence of an agreement to the contrary. There are therefore many aspects of statute law that might not conform with your business model, or your idea of how your business will run. It is therefore better for your business to be governed by an Agreement, instead of the sections of the Act, many provisions of which may surprise you in their application.

Limited Partnership

Limited Liability Partnerships (LLP’s) are rarer and are subject to The Limited Partnership Act, 1907. A limited partnership is formed when one or more of the partners invest capital into the business but does not participate in running and managing the business. Those partners can only lose the amount of money initially invested. The disadvantages are that the LLP must be registered at Companies House, must meet their stricter rules, and must publish their accounts annually.

Agreements

Here are some of the things that will be included, and can be discussed, in a Partnership Agreement:

  • Commencement and Duration
  • Partnership Name
  • Place(s) of business and ownership of the property therein
  • The accounts system to be used
  • Banking arrangements
  • Capital, current accounts, drawings
  • Partners obligations and duties
  • Maternity etc leave
  • Management and meetings
  • Limitation on any one partners authority
  • Retirement and expulsion

For smaller partnerships some of these matters may require very little regulating, and therefore the individual clauses can be suitably adjusted. We can offer detailed Agreements for professional partnerships with numerous partners, or we can provide for two people looking to run a business for a short period of time, and anywhere in between.

If you are interested in creating a Parntership Agreement we would be happy to offer you a free first interview.


Frequently Asked Questions

1.  What are the advantages of a Partnership?

Here are a few:

  • More finance can be raised than sole-traders due to more owners investing in the business
  • The partners can share the workload
  • Each partner can specialise in their own area of the business
  • Due to the business being generally larger than a sole-trader, it has a better chance at generating other sources of finance e.g. bank loans, etc
  • Partners can cover each other during holidays, illness etc


2.  What are the disadvantages of a Partnership?

Here are a few:

  • Any actions and decisions taken on behalf of the business are legally binding to ALL partners
  • The partners share the profits
  • Decisions may take time to reach as different partners may disagree
  • Partners are equally responsible for liability
  • A partnership is automatically terminated when a partner dies, is made bankrupt, or decides the partnership should be dissolved. Therefore the process of forming a new partnership has to be taken (one of the things that can be avoided using a Partnership Agreement)

Contact Details:

Contact Oliver Kew in our Company and Partnership Department on:
Direct Line: 0118 955 9612
Email: o.kew@hewetts.co.uk

or complete the Company Law
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