Entering into a business partnership has many great benefits, but we have all heard of scenarios where great partnerships have disintegrated and left the partners involved with nothing but a trail of damages and costs. If you are considering entering into a partnership then it is imperative that you have a solid, written partnership agreement prepared by a legal practitioner.
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 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.
Why Choose a Partnership?
By definition, partnerships are a business structure which allows for two or more people to go into business together for a common purpose and share responsibilities and liabilities. There are many advantages of setting up your business as a partnership, some of which include:
- The old saying “Two heads are better than one”. A partnership allows you to collaborate ideas with your partner or partners to achieve the goals of your business
- It’s relatively easy to establish
- More capital is available for the business
- You will have a greater borrowing capacity
- There’s opportunity for income splitting which may result in tax savings
Finally, 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.
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.
For comprehensive advice or help setting up your partnership agreement contact Robert Wood and Associates. Our expert lawyers in Melbourne are ready to assist you with all your legal needs.