Partnership Agreements

Do you have a partnership agreement?  If so, have you reviewed it lately?

If your answer is NO then it may be time to conduct a review.

Why bother to have a partnership agreement?  Well, without one the partnership is governed by The Partnership Act 1890 and you have a ‘partnership at will’, the implications of which are:

• All partners share equally in the partnership income
• All partnership decisions need a unanimous vote
• One difficult partner could hold the partnership to ransom
• Termination of the partnership can be enforced simply by one partner issuing a notice to the other partners
• Such a notice could force the sale of partnership assets and the redundancy of staff
• The creation of a new partnership, following dissolution, may require the PCT’s approval ….. and these events do happen!

With an agreement you can:

• Ensure protection for the financial interests of each partner
• Reduce the risk of acrimonious partnership disputes
• Set agreed rules for the appointment and retirement of partners
• Set out the circumstances leading to the suspension of a partner
• Remove governance by the Partnership Act 1890 – remember! all partners are jointly and severally liable i.e. each partner is responsible for the actions of his/her fellow partners

Any partnership agreement should be prepared in consultation with an accountant and a solicitor to ensure that all legal and tax issues are addressed.