Partnership Agreements Key Facts
- A partnership is created whenever two or more people carry on a business for profit;
- Partners have unlimited liability for the debts of the partnership, appropriate and adequate insurance is therefore extremely important;
- There is no registration process when forming a partnership;
- Partnerships don’t have to publish their details or accounts; and
- A partnership is not a separate legal entity from its partners.
Do you need a written partnership agreement?
If there is no written agreement then the Partnership Act 1890 will govern the partnership. It is unlikely this old Act will be appropriate for a modern business.
Partnership agreement key clauses:
- Description of the partners old and new.
- The commencement date of the partnership. Most partnerships are “at will”. This means that they will last unless and until someone serves notice to dissolve it.
- The business of the partnership should be carefully described, and the procedure for modifying it.
- The partnership name.
- How income and capital are to be apportioned between the partners to reflect their levels of investment and involvement in the business.
- Description of what is partnership property and what is the personal property of the individual partners.
- The management structure and role of the partners in the business.
- How prolonged absence of the partners is dealt with, and when a partner may be expelled.
- Partners are not employees however many modern partnership agreements to have employee type rights to maternity and paternity leave rights to encourage a broader range of partners to invest in the business.
- Restrictions on partners.
- Death, retirement & admission of partners and the dissolution of the partnership.
Limited Liability Partnership (LLP) key facts:
- The LLP has its own legal personality, separate from that of its members (partners);
- An LLP is incorporated at Companies House, and its details and accounts published;
- The liability of the members of an LLP is limited.
For more details on how we can support you or your business, contact our Corporate and Commercial Law team today.