Is it time to formalise your partnership?
Are you considering a change to limited liability partnership status?
A partnership arrangement will come into existence once two or more people carry on a business in common with a view to profit. Often friends do not actually formalise this arrangement prior to going into business, but this can result in problems in the long run if there are disagreements. A partnership has no separate legal identity and it cannot own assets in its own name – the assets, and any liabilities, are held jointly in the names of the partners.
Under the Partnership Act 1890 certain terms will be implied into any partnership arrangement unless otherwise agreed. For example:
- an entitlement to share profits and share capital equally;
- an entitlement to interest on advances to the partnership (capital);
- when one partner terminates their partnership, the partnership must be dissolved;
- a requirement that every partner take part in the management of the partnership.
These implied terms can only be superseded by a written partnership agreement. If your arrangement is that one partner has provided the capital to the partnership and the other partner has supplied say, know-how or property then you will probably need to agree written terms. Similarly you may have a “sleeping” partner and again the terms should be agreed in writing so as not to come under the provisions of the default implied terms.
Based in Stoke-on-Trent, Staffordshire, our commercial lawyers have a reputation for providing accurate advice, and dealing with complex problems in an efficient manner. To find out more, contact us on 01782 577000.
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