Partnerships

Similar to that of Sole Traders, Partnerships do not stand as a separate legal entity and all partners are personally liable for any debts and assets. It is quite common that most partnerships are formed informally and therefore no contract agreement has been established or put in place. This being the case, a partnership is still governed by the Partnership Act 1890.

Under the Partnership Act 1890, all partners are deemed equal and all have the right to split profits equally too. This arrangement is easy to set up and establish, however if disagreements do arise amongst the partners then this could complicate matters and require the involvement of solicitors and legal advice.

On the other hand, a partnership agreement is always the best route to take no matter how much you think you trust your partner, it is not wise to build a business this way.

Key points to consider:

1. How profits are going to be split
2. Roles and responsibilities
3. How capital and assets introduced to the partnership are owned
4. How to exit the partnership

The above list is not exhaustive and just highlights a few items to consider when entering into a partnership, clarity is highly important.

Is this something you are thinking of starting? Are you already established but running into disagreements and would like to dissolve the business?

Get in touch with us at MTD and find out how we can make the process a lot smoother and less stressful.