Partnership agreements

Why have one?

You have just gone into business with your best friend whom you’ve known for years. As you trust him implicitly is there any real need for any partnership agreement?

Well, if you have no formal agreement then your business will be bound by the terms of the Partnership Act of 1890. Whilst it’s reasonably straight-forward, it was written over a 100 years ago so it may not be entirely relevant in today’s business climate.

What to include

Basically it should set out the rules determining how the partnership should operate - for example how the partnership assets are divided when the partnership comes to an end.

If there is no agreement in force there will be uncertainty and if the Partnership Act of 1890 is applied this could well lead to unfavourable results.

It is probably a good idea (though not mandatory) to have a partnership agreement drawn up by a solicitor, but think carefully about what should be included. Look at section 5.1.2 in our main guide here for you an example basic framework by way of a guideline.