A partnership can be defined as an association of two or more persons carrying on business together with a view to sharing profit.
Partnerships are governed by the Partnerships Act 1890. Partners can be real persons or corporations. A partnership does not in the eyes of the law have its own distinct legal identity. This means that each of the partners is individually responsible for all of the liabilities of the partnership, without limitation.
A partnership agreement is a formal contract between the partners, which governs the way the partnership operates. There is no obligation to have a formal partnership agreement; in the absence of such an agreement the law provides that profits and assets of the partnership are generally shared equally between the partners. The law also provides that, in the absence of express agreement, the partnership will automatically come to an end if any single partner leaves. However, these provisions can be adapted by the terms of a partnership agreement. This becomes particularly relevant in determining the distribution of partnership assets if the partnership comes to an end which, in the absence of prior agreement, is often an issue which gives rise to protracted and costly disputes. It is therefore advisable for any partnership to have a formal partnership agreement.
You should also be aware that there is a special type of partnership, called a Limited Liability Partnership (or LLP), in which, unlike the traditional partnership, the liability of the partners is limited.
We have extensive experience and expertise in advising on partnership matters and drafting partnership agreements. We take a realistic and commercial approach to a client’s needs, always ensuring that we understand the commercial imperative behind the partnership, in order to tailor the partnership agreement to best fit the client’s requirements.