There are many issues to be considered before going into partnership and the importance of having a Partnership Agreement in place before you open for business cannot be stressed too highly. If you don’t set out your rights and responsibilities in a written Partnership Agreement you will not be equipped to settle conflicts when they arise, and petty misunderstandings can erupt into full-blown disputes.
Michelle Hayter, Dispute Resolution Partner, says “Having such an agreement in place will allow you to structure the relationship you have with your partners in a way that suits your business. It will define the share of profits (or losses) each partner can take, the responsibilities of the partners and what will happen to the business if a partner leaves.”
Most partnership agreements will cover these areas :
- The name of the partnership
- Contributions to the partnership – cash, property or or services
- Allocation of profits, losses and draws
- Partnership decision making
- Partners’ authority
- Management duties
- Admitting new partners
- Withdrawal or death of partner
- Resolving disputes
Disputes frequently arise between fellow partners either because they are in breach of their statutory or fiduciary duties and when it is thought that one partner is not pulling their weight or taking an unfair share of profits. This can lead to one or more partners leaving the business either by serving notice, or by expulsion, which in turn can lead to a claim for damages. A well-crafted Partnership Agreement will save a lot of heartache and bad feeling and quite possibly legal action. Do not wait for a conflict to arise before setting out some sound rules and procedures for your business.
For a free initial meeting please call 01202 499255 and Michelle or a member of her team will be happy to discuss any questions you may have.