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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
