Planning is an essential part of creating a successful business partnership. The setting up of a formal agreement and planning for the unexpected is especially important for a partnership.

In broad terms a partnership agreement basically sets out rules that should detail how the partnership operates and cover all the main what if scenarios. Should there not be an agreement then there will be a large element of uncertainty, and applying the underlying law, such as the Partnership Act 1890, may well lead to unwanted results.

You will need to identify exactly what you want the partnership agreement to cover, before having it drawn up by a solicitor.

Areas which will need to be considered are as follows:

The Running of the Business

• the respective partners´ duties
• the working hours and holidays
• decision-making procedures
• the business premises

Financial Matters

• the agreed profit-sharing arrangements, and drawings on account
• partnership capital invested (and interest arrangements)
• banking and financial arrangements to be put into place
• the partnerships accounting arrangements
• the provisions for tax payments

Other Special Circumstances

• partner retirement or exit procedures
• what happens in the event of the death of a partner
• providing for partners’ retirements and dependants
• establishing the right to expel a partner
• how to arbitrate for unresolved disputes
• new partners joining the partnership