Partnerships are constituted by two or more people who wish to conduct a business together. Partnerships are documented in partnership agreements and can be of a general or limited in nature.
In general partnerships, all partners are equally responsible for the management of the business and for the payment of its debts. Where as in limited partnerships, one or more of the partners are limited in their responsibility to pay the debts of the business. It is prudent to note that there is an inherent degree of risk in being a party to a partnership as the actions of your partner or partners can bind you to the payment of debts and expose you directly to liability.
Given the potential risk, it is of vital importance that you consult a solicitor to assist in drafting or reviewing any partnership agreement. A partnership agreement, as bare minimum needs to be legally binding and include specific details relating to:
- how partnership disputes are to be determined;
- how proceeds and profits are to be divided; and
- how any business debts or shortfalls are to be paid.
Entering into a written partnership agreement can assist the parties to clarify relevant rights and obligations with a view to avoid misunderstandings or disputes. In most cases, disputes arise regarding the operation of the partnership, in particular, how much income or loss is to be distributed and how the business will be controlled.
In the absence of such an agreement, there will be no documentation to rely upon when a dispute arises. This can lead to a host of extremely complicated issues arising, adding significant cost and stress to an already highly emotional time.
How we can assist
At Forge Legal, our experienced team have navigated and resolved many complicated partnership disputes, both with and without valid partnership agreements. If you are considering a business partner or expanding your existing partnership base, it is best practice to have the tough conversations first and ensure proper documentation is in place before expanding your business. Forge Legal’s professional team has decades of experience assisting business’ draft a suitable partnership agreement, and otherwise provide advice concerning the operation of an existing partnership and related issues, including where applicable partnership disputes. If you require assistance in relation to any partnership matter or to navigate around potential disputes, contact our team to make sure you are in the best position to make the best decisions.