Partnership agreement solicitors, Slee Blackwell, look at why it is so important for business partners to have a formal agreement.
If you operate your business as a partnership and don’t have a partnership agreement then you really should think about getting one drawn up.
A formal partnership agreement enables you to operate your business in the way that you want it to be run. If you don’t have an agreement then in certain situations the law will stipulate how matters should be dealt with, and this may be contrary to your intentions and your financial interests.
A partnership agreement can also avoid unpleasant disputes arising, and enable any contentious issues that do arise to be sorted out swiftly and cheaply.
A partnership agreement allows you to set out what should happen if a partner wishes to leave the partnership or passes away. It can also deal with partners who are unable to continue working due to ill health or who lose capacity to manage their affairs. It can specify how their share of the business should be valued and how remaining partners or new partners can acquire their shares.
The partnership agreement can also clarify what the assets of the partnership actually are, including buildings, land and equipment. Disputes often arise when partners are unclear about whether certain assets are owned by the business or owned by individuals in their personal capacity and a carefully drafted partnership agreement will avoid these misunderstandings.
In addition, the agreement can set out each partner’s entitlement to capital and profits. It can also specify the role of each of the partners and what is expected of them. Again, this brings clarity to the business arrangements and avoids conflicts which can arise through genuine misunderstandings.
Although preparing a partnership agreement involves a cost, it can be seen as a long term investment that will enhance the business and potentially save the partners a great deal of stress and money in the future. Furthermore, the cost of having an agreement drawn up is an expense of the business which can be set off against tax.
If you already have a partnership agreement, but it has not been reviewed for a number of years, then it may be prudent to go through it with your partners and if it is no longer suitable for your present and future needs then you can get a new one drawn up.
For further guidance and a free initial chat about how we can help you, call partnership agreement solicitors, Slee Blackwell, on 0333 888 0404 or email us at [email protected]