A partnership is a very common way to structure a business with each partner bringing their own knowledge, skills, experience, and contacts to the business, potentially giving it a better chance of success. However, when entering into a partnership agreement, it is essential to ensure that all parties involved are on the same page regarding their rights, responsibilities, and expectations and the best way to do this is to seek the assistance of a professional business lawyer. Ringwood’s Robert Wood and Associates is your trusted choice for everything related to commercial law. Read on to find out more partnership agreements and the important role a lawyer can play.
What Is a Partnership Agreement?
A partnership agreement is simply a legal document which formalises the role and responsibilities of each partner, their level of authority and the distribution of profits and assets. Like any contractual agreement, partnership agreements do not have to be in writing, as verbal agreements are also legally binding. However, having a written contract prepared by a business lawyer is always going to be substantially more beneficial to all parties.
When it comes to running a business with one or multiple partners, having a partnership agreement will help to avoid disagreement, confusion, and possible disputes in the future. In a partnership, each person is liable for the debts and actions of the other partners, so the contractual relationship and obligations need to be completely transparent. A contract lawyer can prepare a partnership agreement and advise you on your rights, however it is also recommended that each individual partner seeks their own legal advice independently so that fair terms can be agreed upon by all partners.
The Different Types of Partnerships
There are three general types of partnership arrangements:
- General Partnerships – assume that profits, liability, and management duties are divided equally among partners. For an unequal distribution, the percentages assigned to each partner must be documented in the partnership agreement.
- Limited Partnerships – more complex than general partnerships, these allow partners to have limited liability as well as limited input with management decisions.
- Joint Ventures – act as general partnership, but for only a limited period of time or for a single project.
Why Choose a Partnership?
There are many advantages of setting up your business as a partnership, some of which include:
Diverse Skills
One of the benefits of a partnership, when compared to a sole trader, is that it allows each partner to bring a different skill set to the table. Greater knowledge and experience as well as complementary skills can help you grow the business.
More Capital
A partnership allows for resources to be pooled and this has the opportunity to create more capital to start off with. The right business partner may also enhance your ability to borrow money to finance business growth.
Greater Support
It’s helpful to be able to bounce off ideas someone else or debrief on important issues. Having a small team of decision makers can allow your business to react quickly without having to rely entirely on the ideas of one person. Moral support is also vital when encountering setbacks or everyday frustrations.
Simple Operation
Partnerships operate in a similar way to the sole trader structure, as there are no management or reporting obligations to follow. How they work is up to the partners themselves.
A business partnership can be a very effective way of running a business. However, it is imperative that your partnership is formalised with a written agreement. Having a partnership agreement written by a lawyer will ensure everyone involved knows exactly what their rights and responsibilities are. The agreement will also include formalised dispute resolution policies which will be invaluable in the event of a disagreement within the partnership. Your lawyer will be able to guide you through the entire process of setting up your partnership, from providing advice to writing the partnership agreement.
Business Law Solicitor – Eastern Suburbs
For comprehensive advice or help setting up your partnership agreement contact Robert Wood and Associates. Our expert business lawyers in Melbourne are ready to assist you with all your legal needs. Call 03 9762 3877 or get in touch online now.
