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Partnership Agreements – how Lawson-West Commercial can help you

Why is a Partnership Agreement needed?

 
The Partnership Act 1890 regulates all partnerships unless the partners of the business agree in writing something different.  So if you don’t have a Partnership Agreement, your business will be regulated by a law drawn up in 1890.
 

Giving Notice with a Partnership Agreement

The Partnership Act 1890 creates something of a lottery for business because it states that any partner can bring a partnership to an end simply by giving notice, even verbal, to the other partners. If the partnership is dissolved then the business is closed and the assets are sold off by a court appointed receiver so, if one partner decides to leave, the business has to close. This was fine in 1890 but times have changed and businesses need the ability to adapt and change to survive in the current market.
 
Under a Partnership Agreement, you can decide how much notice you require your partner(s) to give you and whether any partner or only certain partners can bring the agreement to an end, thus protecting your business and assets.
 

Expulsion of Partners with no Partnership Agreement in Place

Another major flaw with the Partnership Act 1890 is that expulsion is not an option and so, to get rid of a difficult partner, the only option is, once again, to end the partnership.
 

Advantages of a Partnership Agreement

A lot of people don’t want to consider making a Partnership Agreement because it seems like you don’t trust your partner but it’s actually the opposite.
 
  • Setting up a Partnership Agreement shows a commitment to the business and each other
  • You can control the notice another partner has to give to leave,
  • You can control who can decide to dissolve the partnership,
  • You can protect yourself by added clauses that enable you to expel difficult partners,
  • A Partnership Agreement can help with obtaining finance because it shows the banks that you are serious.
 
So don’t delay, the best time to set up a partnership agreement is now when you don’t need to rely on it, so call David Heys on 0116 212 1027 today.