Although it is something you may not wish to think about when entering into a partnership, you should consider what might happen if you disagree with your partners in the future.
It is best to agree upon issues such as the roles, rights and responsibilities of the partners and practical structural management issues before you begin trading and document them in the form of a partnership agreement.
The partnership agreement should also deal with how partners can exit from the partnership and how their share in the partnership should devolve, for example by providing a right of first refusal to other partners.
If you do not have a partnership agreement any disputes must be dealt with under the provisions of the Partnership Act 1890, which may not be suited to your business or personal circumstances.
Not only will the partnership agreement give you a document to fall back on if needed, it will act as a focus to concentrate all the partners’ minds on the important issues before you begin trading. If there are any major disagreements it is better to find them out at this stage, before possibly tying yourself into, for example, business premises and trading stock.
If you are a partner in an existing partnership without a partnership agreement it is not too late to put one in place.
For further assistance see our article: Partnership agreements.
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