A partnership is a type of business formation which is automatically created where two or more individuals run a business with a view to sharing profits.
There is no legal requirement for partners to enter into a partnership agreement but we would recommend it be entered into as a key document on incorporation of the partnership.
- The purpose of a partnership agreement is to set out how the business will be managed, the rights and obligations of the partners and how a disagreement within the partnership should be managed. Most partnership agreements will contain the following key clauses.
- Commencement and duration – states when the partnership was established and how long it shall last. Partnerships can be for a fixed term, for an indefinite term which may be determined on notice or for a single undertaking which is determined on completion.
- Capital and partnership property – subject to any express agreement (such as in a partnership agreement) the capital and profits of a partnership are to be shared equally. Partners may wish to amend this division based on capital put into the business, time devoted or experience of the partners. It is also important to specify what property belongs to the partnership or the individual partners and what will happen to those assets on insolvency, death or on increase of value.
- Restrictions on partners – outlines what partners must not do, for example they cannot compete with the partnership.
- Meetings and voting – establishes how meetings should be called and held, what percentage of votes are needed to pass a resolution.
- Restrictions on outgoing partners – outlines what a leaving partner cannot do, such as soliciting the partnership's business.
- Admission of new members – how a new member should be brought in.
- Retirement or death - how a partner may retire from the partnership and the consequences of retirement on death on the existence of the agreement.
- Expulsions of a partner – unless expressly agreed no partners can be expelled from the partnership. You can provide for expulsions in the agreement on acts such as breach of the agreement, ceasing to hold relevant professional qualifications, on conduct having adverse effect on the partnership or neglecting to perform duties. This is a non-exhaustive list and can be tailored to the individual needs of the partnership.
We provide a personal service which takes into consideration the needs of the partners and the business to produce an agreement which is desirable for all parties. We are also able to advise partners on existing partnership agreements and how they can be altered.
To find out more about the legal services we offer or to arrange an appointment, please contact us on 01603 693500 or email us using the 'Make an Enquiry' form on our website. Appointments are available at our Norwich, North Walsham and Sheringham offices.