Fowles Spurling Cannon - can we save you money, or help you generate extra income?

SEARCH, INDEX, UPDATES, CONTENTS, INFORMATION, PARTNERSHIP AGREEMENTS

A business Partnership can exist under a verbal or written agreement, and can be varied at any time by agreement between the Partners.  All Partners should be aware that they have joint and several liability for all Partnership debts.

A new business venture between relatives, friends or colleagues may start with an informal, enthusiastic spirit of agreement, and a formal Partnership Agreement may seem unnecessary.

In order to prepare Accounts for the Partnership, some matters will have to be agreed, and it is important that all the Partners understand the Accounts which they will be asked to agree.

A Solicitor experienced in drafting Partnership Agreements will be able to advise on the appropriate clauses for an individual Partnership.  A formal Partnership Agreement, drawn up before the Partnership commences, as soon as practical thereafter, or indeed at any time, can prevent serious disagreement and major financial loss.

One advantage of having a Partnership Agreement drafted by a Solicitor should be a clear and unambiguous document to which all the Partners can refer.

We strongly advise that Partnership Agreements are drawn up by solicitors who are familiar with this area of the law. 

A typical Partnership Agreement will include clauses among others to determine -

• the commencement date of the Partnership
• the name of the Partnership business
• the nature of the Partnership business
• the location of the Partnership business
• the Names and Addresses of the Partners
• where the Partnership Bank Account will be maintained
• who will sign cheques and whether more than one signature will be required above a specified amount
• under what circumstances overdraft or loan borrowing can be agreed
• how much Capital each Partner will introduce, initially and at later dates if required
• whether interest will be paid on Capital as a first share of profit
• whether there will be Initial Salaries for the working Partners
• the hours to be worked by each partner, perhaps a definition of full time working
• whether some or all of the Partners may become involved in other business activities
• whether the Partnership will use any assets owned outside the Partnership
• the terms applicable to such use, under a formal lease or not, rent payable, review dates, repairs, alterations to the property, insurance.
• the division of Revenue Profits or Losses, and the effect of the Initial Charges
• the division of any Capital Profits or Losses which may be different
• how the capital assets of the Partnership are to be held  (probably as Tenants in Common)
• the ratio in which the capital assets of the Partnership will be held
• the Partnership treatment of Goodwill
• the delegation of certain responsibilities between Partners
• which Partner(s) will be responsible for keeping the books and records of the Partnership
• that all Partners will have access to the books and records
• when the Accounting Year End will be
• who will be the Accountants to the Partnership
• time limits for producing Year End Accounts
• whether Management Accounts will be produced
• the frequency (and location) of Partners meetings
• the Partners drawings on account of Profit
• payment of the Partners personal liability for tax from the Partnership Bank Account
• how and when overdrawn capital accounts are to be repaid
• whether the Partnership will provide cars to the Partners, to what value and how frequently changed
• how private mileage will be treated
• what travelling expenses will be reimbursed and mileage allowances paid
• what insurance policies will be maintained by the Partnership
• whether the Partnership will provide life assurance cover for the Partners (especially if there is significant borrowing)
• the Professional Qualifications, standards, training to be maintained
• holiday entitlement
• profit sharing during sickness
• promotion of the business

It will determine what the Partners cannot do without the consent of others or all of them such as -

• engage or dismiss staff 
• lend money or pledge the credit of the firm other than in the ordinary course of business
• buy capital goods over a specified value

It will identify how the Partnership may come to an end, for example -

• in the event of the Bankruptcy of a Partner
• on the serious breach of the Partnership Agreement
• a period of illness
• by notice of retirement or resignation
• the period of notice to be given in varying circumstances
• the position of the Personal Representatives on death
• the option of remaining Partners to continue
• the first option of remaining Partners to acquire the retiring Partners interest, and a time limit
• the period over which a retiring Partner is to be paid out, and any interest payable
• the valuation of Goodwill on retirement
• whether additional Accounts will be drawn up (or Annual Accounts apportioned)
• continuation of Professional Indemnity Insurance after retirement
• restrictions on a retiring Partner to set up a competing business within an area or time limit
• a means of Arbitration if agreement cannot be reached

• notification of Partnership changes to customers, suppliers, the Inland Revenue, Customs & Excise

Reminder - disclaimer applies. Please feedback your comments.  This page was last modified 12th February 2002.