What is a Partnership Agreement?
Broadly, is a legally binding contract between you and your business partner(s). It sets out the rights and responsibilities of each party, how the business will be run and ultimately it will protect your interests and the company’s. You don’t need to file it at Companies House.
Do you need a Partnership Agreement?
Do you have a business partner? Then YES, 100%!
You might have started the company with your best friend whom you trust with your life and you don’t think anything will happen. Maybe that will be the case and you agree on every decision. What if you don’t? I’ve seen it many times, friendships end because the business gets in the way of the relationship. Or simply, when it comes to money, most people tend to change. One way or another why not prepare yourself for the worst?
How to get a Partnership Agreement
There are a lot of standard Partnership Agreements out there you can download, some of them even free of charge. However, you want the agreement to be tailored to your exact situation. If you start adding or changing tings yourself, unless you are a solicitor and you know exactly what you are doing, you might end up making the agreement unclear which will cause problems in court. The free standard agreements might also be out of date, inaccurate or wrong.
I would therefore advise you to get a solicitor to draw the agreement, it doesn’t cost that much and might be money well spent down the line.
What does the Agreement include?
A typical agreement includes:
1. Partnership start date, address, name and purpose.
2. Contact information for each partner.
3. Description of partner capital contribution.
4. Responsibilities for the day-to-day management of the business.
5. Profit and loss distributions (equal share or fixed per cent).
6. Rules regarding admission of new partners, withdrawal of existing partners and partnership dissolution including how property/assets may be divided in the event of dissolution.
7. Accounting methods and annual report details.
8. Procedures for when meeting are held and voting rules, how decisions will be made and which decisions require unanimous consent.
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