Why every business partnership should have a deed in place

If you are thinking about entering into a business partnership then it is incredibly important that you set out an agreement that outlines your duties and obligations to each of the partners and to the partnership as a whole. Even when working with friends and family there is the opportunity for disagreement and especially when there is a lack of clarity over how the business operates. Drafting a partnership agreement at an early stage and regularly updating it to reflect changes in the partnership can help avoid expensive buyouts and headaches further down the line.

What is a partnership agreement?

A partnership agreement is a legal document which details the terms and conditions of a business partnership. It outlines specific agreements related to your business over areas such as ownership, decision making, profit and loss and duties and makes each partner clear of what is expected of them. Failing to have a partnership drafted when setting up your company can leave you vulnerable to problems in the future, for instance if a partner makes questionable decisions, retires or sadly passes away.

What should be included in it?

Every business is different and there is no one-size fits all approach to drafting a partnership deed. In fact, your partnership deed needs to reflect the nature of your business and its particular circumstances to be most effective. However in general it should cover the following areas:

• The names of partners
• The name of the partnership
• Commencement date of the partnership
• The nature of the business
• Capital investments required by each partner
• Decision making and management
• Duties and responsibilities of partners
• Profits, losses, drawings and loans
• Share purchasing
• Accounting and record keeping
• Restrictions and covenants
• Entry of new partners
• What happens upon the exit, retirement or death of a partner
• Dissolution and post-dissolution of the partnership
  
  

Reviewing partnership agreements

With the changing nature of businesses and also that of UK law, it is important that partnership agreements are regularly revisited to avoid their terms from becoming void. Should there be changes in legislation, or significant changes in the partnership such as the entry of a new partner then the deed should be revisited and the necessary clauses adjusted.

If you are entering into a partnership and require a deed to be drafted, or you are already part of a partnership and would like your deed reviewing or adjusting then please contact us on 0207 7611 4848 to arrange an initial consultation, or click here to read more about our employment law team.