What is a partnership agreement?
A partnership agreement (or 'partnership deed') is a legal agreement between two or more business partners.
An agreement details the terms and conditions of a business relationship. This means all parties know what is expected of them, how the business will be run, and what will happen if various situations arise (such as a partner retires).
A clearly drafted agreement reduces the chances of disputes arising later.
Why do you need a partnership agreement?
When two or more people go into business together, a partnership is automatically formed under the law. This means that unless you have a partnership agreement in place, your partnership is governed by the laws set out under the Partnership Act 1890.
Since the Act is over a hundred years old, these laws are unlikely to suit your 21st century business. For example, under the Act, it is assumed that all partners are equal and have full authority to take any action they like (this includes being allowed to dissolve the partnership at any time).
What are the different types of business partnerships?
Parkinson Wright can advise you on three types of professional partnerships:
An ordinary partnership is a default partnership governed by the Partnership Act 1890. Unless a partnership agreement is in place, a business must operate under the default provisions of the Act.
Under the Act, partners are equally responsible for every aspect of the business. If the business gets into financial difficulty, each partner is personally liable for debts. Creditors can seize both business assets and each partner's personal assets.
Limited partnerships (LPs) are governed by the Limited Partnerships Act 1907. There are two types of partner in a limited partnership – a general partner and a limited partner.
A general partner is responsible for managing the business day-to-day, whereas a limited partner is more of a silent partner who has invested money in the business. A limited partner does not make managerial decisions.
In a limited partnership, the general partner has personal liability if the business gets into financial difficulty. This means they can lose their home and other assets. The limited partner, on the other hand, has personal asset protection.
A limited partnership is a legal entity that can trade and buy property in its own name.
Limited liability partnerships
A limited liability partnership (LLP) is similar to a limited partnership (LP). The differences are that all partners can make management decisions with an LLP. In addition, all partners' personal assets are protected if the company falls into debt.
How we can help
Parkinson Wright can assist your business with the following:
Create new partnership agreements
Our solicitors can draft an agreement that is tailored to your business. Partnership agreements often cover:
- The assets that individual partners have contributed to the business.
- What to do if more capital is needed.
- How profits and losses will be shared.
- Each partner's duties and responsibilities.
- Any restrictions on each partner's business activities outside the company (covering confidentiality, conflict of interest etc).
- How often meetings will take place.
- Who can vote at meetings.
- Employment law matters including retirement, maternity leave, holiday etc.
- The procedures when a partner wants to leave the business or a partner dies.
- How a new partner can join the business.
- The process to follow if a partnership dispute arises.
A partnership agreement can be drafted when you form a new company or at any time.
Review and amend existing partnership agreements
If you have had a partnership agreement in place for some time, our solicitors can review and amend it for you.
Since your agreement was drafted, there may have been changes in your business, or new legislation could have been introduced.
We can work with other professionals, such as your accountant, to ensure your partnership agreement continues to serve your business.
Resolve partnership disputes
Disputes between partners can happen for many reasons. Disagreements can arise over a partner not pulling their weight, confidentiality issues, discrepancies with accounting, or even a clash of personalities.
We understand that partnership disputes can be damaging and costly to a business, so we aim to help you to reach a fair solution quickly through mediation or arbitration. If your dispute does escalate, our solicitors have the expertise to build a strong case and represent you in court.
LLPs have tax advantages over other partnerships and bring partners greater financial protection. As a result, many businesses decide to convert from partnerships to LLPs.
Our solicitors can work with you to convert your business from a partnership to an LLP. This involves turning your business into a legal corporation, transferring your business across, dissolving the partnership and registering your LLP with Companies House.
Departures & restructuring
A partnership agreement will set out the processes to follow when a partner leaves a business to protect the other partners' interests. When drafting agreements, our solicitors ensure these procedures are clear to avoid disputes later.
When a partner leaves a business, we can help to ensure the correct procedures are followed. We can also assist with corporate restructuring. A partnership agreement will need to be amended to reflect changes in the ownership of the business.
Our experienced solicitors can work with you and other professionals to reorganise your business and make sure the interests of all partners are protected.
Acquisition & mergers & disposals of partnerships/LLPs
We can offer straightforward, practical advice and work closely with you to ensure your acquisition, merger, or disposal runs as smoothly as possible.
Whatever situation your business is facing, we can explain the options available to you. We can tailor a solution that either helps your business to recover or makes winding up your business as straightforward as possible. We negotiate with HMRC, creditors, and others and work hard to protect your best interests.
Why choose Parkinson Wright partnership agreement solicitors?
Our partnership agreement solicitors can work with other lawyers across Parkinson Wright as well as professional advisors such as your accountant to draft a partnership agreement.
We will ensure the agreement reflects the structure of your business, addresses all foreseeable circumstances and is the backbone of your company's success.
Parkinson Wright's solicitors have several accreditations, so you can rest assured that you will receive expert legal advice and the highest level of customer service.
Solicitors Regulation AuthorityRegulated and authorised by the Solicitors Regulation Authority (SRA).
Lexcel Quality MarkWe have achieved the Law Society’s Lexcel Legal Practice quality mark, which sets the standard for client care.
Get in touch
We offer a Free Initial Assessment, so you can call us without charge or obligation to discuss how we can assist you.
To arrange your Free Initial Assessment at a time convenient to you, please call 01905 401 893.