Partnership Agreement
Below are some of the issues that need to be considered when you set up a partnership and which should be dealt with in a partnership agreement.
Consideration needs to be given as to whether the partnership should be for a fixed term or for the lifespan of the partners. It may be desirable for the partnership to be brought to an end by any partner giving notice or by the happening of a certain event, such as the death, retirement, expulsion or bankruptcy of a particular partner.
Thought needs to be given as to how those assets used by the partnership are to be treated. Are they to be the property of an individual partner, or are they to be treated as the property of all the partners. Such assets will include the property from which the business is to be run.
The partnership agreement should specify how much capital each individual partner is expected to provide for the business initially and in what proportion each particular partner will be expected to contribute towards any additional capital funding requirements.
As with the capital contributions, thought needs to be given as to what proportion of any profit or loss a particular partner will be entitled to or responsible for. The agreement will also need to consider if partners are to be allowed to make drawings from the partnership on account of profits or will they only be allowed to make drawings in respect of actual realised profits.
The agreement should deal with the actual authority of any individual partner, who has what voting rights and for to what these relate, as well as providing a mechanism for resolving disputes between partners.
The agreement should also deal with when and if partners are allowed to retire or when they can be expelled and what happens to their share of the partnership in such circumstances.
The above ais a brief outline of the sorts of issues that should be covered in detail by a partnership agreement.
Without a partnership agreement in place there is room for confusion and uncertainty as to how the partnership can operate and these are often the key ingredients for expensive disputes and crippling litigation. Money invested in a partnership agreement at the start is rarely wasted.
If you need ant further information please contact Simon Morris or Mike Sharp
Duration of the partnership
Consideration needs to be given as to whether the partnership should be for a fixed term or for the lifespan of the partners. It may be desirable for the partnership to be brought to an end by any partner giving notice or by the happening of a certain event, such as the death, retirement, expulsion or bankruptcy of a particular partner.
Partnership assets
Thought needs to be given as to how those assets used by the partnership are to be treated. Are they to be the property of an individual partner, or are they to be treated as the property of all the partners. Such assets will include the property from which the business is to be run.
Capital
The partnership agreement should specify how much capital each individual partner is expected to provide for the business initially and in what proportion each particular partner will be expected to contribute towards any additional capital funding requirements.
Profit and losses
As with the capital contributions, thought needs to be given as to what proportion of any profit or loss a particular partner will be entitled to or responsible for. The agreement will also need to consider if partners are to be allowed to make drawings from the partnership on account of profits or will they only be allowed to make drawings in respect of actual realised profits.
Relationship between partners
The agreement should deal with the actual authority of any individual partner, who has what voting rights and for to what these relate, as well as providing a mechanism for resolving disputes between partners.
Exit of partners
The agreement should also deal with when and if partners are allowed to retire or when they can be expelled and what happens to their share of the partnership in such circumstances.
The above ais a brief outline of the sorts of issues that should be covered in detail by a partnership agreement.
Without a partnership agreement in place there is room for confusion and uncertainty as to how the partnership can operate and these are often the key ingredients for expensive disputes and crippling litigation. Money invested in a partnership agreement at the start is rarely wasted.
If you need ant further information please contact Simon Morris or Mike Sharp
