Do you have a Partnership Agreement that really protects your business?
Mon, 30 Nov 2009 08:11:00
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Many partners in business don’t have a formal agreement or realise that not having one could mean they are at risk when changes happen. Without an agreement, firms are governed by The Partnership Act that dates from 1890! The application of this Victorian legislation could be the source of problems if it doesn’t fit your modern day requirements. A good partnership agreement will ensure that other partners have a survival plan to follow in different circumstances and that protects the future of your business. While it’s advisable to draw up partnership agreements early on, there is no legal duty to do so; many businesses operate on trust alone. Whilst trust has to be a major factor in any successful partnership this can present dangers which partners may not be aware of. For example The Partnership Act may be problematical because without an agreement: • any Partner has the right to dissolve a firm • there is no restrictive covenant on a partner who is leaving • all partners are entitled to an equal profit share • if one partner wants or has to retire other partners can just take over and make no goodwill payment. • no person may be introduced as a partner unless every single existing partner agrees • if one partner dies or is declared bankrupt, the partnership is automatically dissolved Additionally, if you already have a partnership agreement, make sure it’s up to date, as it may not be relevant to your current business. It’s also essential to check that all partners have signed the agreement and that it’s not just in draft form – failure on either of these counts means your agreement is not valid. It’s ironic that whilst your business is a large part of your wealth you may not have it properly protected. In our experience it’s too easy to underestimate the value of a Partnership Agreement. We work with a number of legal practices who are prepared to undertake a free initial appraisal of existing agreements. Please contact us if you would like to take advantage of this offer.  |
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