Partnership agreements

Your agreement should set out the rules governing how the partnership operates, and should cover the main ´What happens if ...´ situations. If there is no agreement, there will be a large element of uncertainty, and applying the underlying law, such as the Partnership Act 1890, may well lead to undesirable results.

It is usually best to have a partnership agreement drawn up by a solicitor, but before you reach that stage you should think about exactly what you want the agreement to cover. In particular, you should consider:

Running the business

  • Partners' duties
  • Working hours and holidays
  • Decision-making procedures
  • Business premises
  • Cars

Financial matters

  • Profit-sharing arrangements, and drawings on account
  • Partnership capital (and interest arrangements)
  • Banking and financial arrangements
  • Accounting arrangements
  • Making provision for tax payments
  • To identify what is partnership property for the availability of 100% (as opposed to 50%) business property relief for inheritance tax purposes.

Special circumstances

  • Partner retirement procedures
  • Death of a partner
  • Providing for partners' retirements and dependants
  • Disability of a partner
  • Establishing the right to expel a partner
  • Arbitration for unresolved disputes
  • Business valuation procedures