Home > > Business start-up > Partnership agreements

Partnership agreements

People starting up in partnership often ask whether it is really necessary to have a formal partnership agreement. The answer is definitely 'Yes'.

Did you know
That if you have no partnership agreement, then the Partnership Act of 1890 applies. The framework provided by the act is simple and straightforward, but does not deal with the many complications of trading a century after it was passed.

Basically, the agreement should set out the rules governing how the partnership operates, and should cover the main ´What happens if ...´ situations. If there is no agreement, there will be a large element of uncertainty, and applying the underlying law, such as the Partnership Act 1890, may well lead to unwanted results.

It is usually best to have a partnership agreement drawn up by a solicitor, but before you reach that stage you should think about exactly what you want the agreement to cover. In particular, you should consider:

Running the business

Partners´ duties
Working hours and holidays
Decision-making procedures
Business premises
Cars

Financial matters

Profit-sharing arrangements, and drawings on account
Partnership capital (and interest arrangements)
Banking and financial arrangements
Accounting arrangements
Making provision for tax payments

Special circumstances

Partner retirement procedures
Death of a partner
Providing for partners' retirements and dependants
Disability of a partner
Establishing the right to expel a partner
Arbitration for unresolved disputes
Business valuation procedures

Do contact us if you would like further help or advice on this subject.

Introduction

Tax and your business

Specific business types

Going into partnership

Planning pointers

A selection of our other business guides

Our Latest News

Increase in risk of a second recession, says think-tank

The chances of the UK economy entering a second recession next year have risen, according to the National Institute for Economic and Social Research (NIESR).

UK skills training needs radical overhaul

The British economy could find itself facing a period of decline if the skill levels of the workforce do not show marked improvement, it has been claimed.

Compulsory retirement age to be retired

The government is proposing to scrap the default retirement age of 65 by October 2011.

Savers not being told about interest rate changes

Many banks and building societies are failing to keep savers properly informed about changes to the interest rates on their accounts, comsumer group Which? has claimed.

Self-employment declarations should be respected

With thousands of people predicted to start up their own micro-businesses as unemployment rises, a business group has called on the tax authorities to respect their employment status.

Government publishes a raft of tax consultations

The Treasury has issued nine consultation papers on various aspects of the personal and business tax system in what amounts to a far-reaching overhaul of the entire regime.

Prospect of rise in energy costs for business

Businesses have been warned that they could see a steep rise in energy costs over the coming years.

Banks under pressure to increase small business lending

Banks could face possible tax sanctions if they fail to boost lending to smaller businesses.