Whether you’re starting a business with your best friend or an acquaintance, partnership agreements are essential to have in place to minimise the potential for disputes and issues arising in the future. Stacks helps you put a solid partnership agreement in place for your business, giving you peace of mind and security.
Any partnership starting up will need to give consideration to its overall business plan. This will include putting agreements in place to manage any issues that may affect the business’ partners.
A Partnership Agreement is an important legal document that defines the nature of the partnership and the obligations and rights of each partner in the business.
It is often the case that two friends, colleagues, or even spouses, become partners in a business together and fail to plan ahead for possible eventualities or disputes. The view is sometimes taken that a close personal relationship with your partner removes the need for a formal agreement. This is a mistake. As business partners you are liable for the actions of another partner. In the absence of a Partnership Agreement, you could find yourself financially liable for a decision your partner has made, such as signing a bad contract. A Partnership Agreement can clarify issues about partnership liability.
As all businesses are unique, a Partnership Agreement will need to consider the particular needs of your business. A Stacks commercial lawyer can provide advice about managing the risk of your partnership, ensure that you understand your legal obligations as a partner, and draft the terms and conditions of your Partnership Agreement.
What is a Partnership?
A Partnership is a particular business structure whereby two or more people go into business together with the view to making a profit. Each partner is responsible for the actions of another, including being liable for business debts. A partnership can be ‘normal’ (does not need to be registered under the Partnership Act), ‘limited’ or ‘incorporated limited’. The type of partnership will affect issues like registration requirements, tax requirements, and partner liability.
What issues might be addressed in a Partnership Agreement?
- What financial contributions will partners be obliged to make in order to set up and run the business?
- What work obligations will partners have?
- What regular income will partners be entitled to?
- How will partners benefit from the business’ profits or equity?
- In the event that one partner contributes more time or money to the business, will they be entitled to a greater share in the profits?
- How will business losses be managed?
- What leave entitlements will partners have? For example - sick leave, parental leave, long service leave, annual leave etc.
- What will happen in the event that a partner decides to leave or retire? How will their overall contribution to the business be valued?
- What procedures will there be for getting rid of a partner who is not performing well?
- What will happen in the event that a partner dies or can no longer continue in their role?
- What insurance policies will be taken out to insure against different situations arising?
- How will disputes between partners be resolved?
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