Are you in a business partnership? Do you even know what a partnership is? Unsure whether you need a Partnership Agreement in place? Read on…
The Partnership Act 1890 defines partnership as “persons carrying on a business in common with a view of profit.” As with all areas of law this may seem pretty straight forward, but there have been cases where it has been decided that there was a partnership, despite an individual taking no share of the profits. In this case for example it was decided that there was a partnership as profit was intended. Partnerships can be created without even realising it! A partnership occurs where 2 or more people go into business together. Both registered as self-employed and are of no separate legal identity.
A partnership is a contractual relationship, and it may be created orally with no formal written agreement but it is always advised that a written contract is put in place. As it is a contractual agreement, a partnership is only created if all the requirements of a contract are fulfilled. What is a Contract? Often when a contractual relationship breaks down it is then the courts need to decide whether a partnership existed in the first place and if it did then there are implications on all parties involved.
The Partnership Act 1890 sets out 9 terms which are implied into this contract should there be no written formal agreement, this is why it is important that you get a Partnership agreement in place. They include for example:
It is also worth remembering that in the absence of an agreement property will be partnership property if there is an implied agreement to that effect.
Still unsure whether you need a partnership agreement? Want to chat with someone about getting one drafted?
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