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Commercial Law Experts can help you understand your Rights

A partnership is an agreement between individuals who wish to finance and operate a business together. Reliable commercial lawyers are happy to guide clients who are facing anxieties and problems related to partnership agreements. In general, partnerships have certain advantages over sole proprietorships. Multiple partners may be able to raise more money than a single individual and their borrowing ability will be greater. Moreover, partners often bring their own skills to a business. In addition, employees may be more motivated if given the incentive to become a partner. You will enjoy shared management and control of the business.

A partnership agreement is a legal contract that clearly describes and lists all the duties and obligations of the partners in the business. In general, partnership agreements tend to be rather complex because the document has to include potential business situations and corresponding solutions. The absence of a partnership agreement is likely to result in confusion, stress and delay over distribution of assets and settlement of debts and so on.

A well-structured and watertight business partnership document should contain the following details:

  • Name and address of the business
  • Duration of the partnership: This may be listed as a specific date or until the partnership dissolves or a partner passes away etc. The duration will be decided depending on what the partners want
  • Business purpose: While some partnership agreements like to keep this flexible (in case of expansion or diversification), some contracts have clear-cut business goals described in this section.
  • Bank account information: The agreement will contain details of partnership accounts as well as information regarding cheque signing privileges etc.
  • Distribution and sharing of profits or income (if applicable) between partners
  • Dispute resolution and arbitration in the event of differences: A clear document can help prevent confusion and reduce expensive litigation costs as the agreement will serve as a legal reference point.

Other details included in partnership agreements could include operational responsibilities, decision making, steps to be followed in the event of insolvency or bankruptcy and voting rights and so on. Each business will have different requirements and each partnership agreement may contain a different set of information. Structuring a partnership agreement is not a legal requirement under Australian law, but it provides a solid foundation for the success of your business.

Even if your partners are relatives, friends or family members, it’s a good idea to seek legal counsel to draw up a formal business contract. This will help define relationships, obligations and responsibilities in a clear and unambiguous manner. Many business partnerships flounder in the absence of a written and signed business agreement. Former friends and associates may fall out in an acrimonious manner due to differences of opinion.