DRAWING UP A WRITTEN AGREEMENT
A Partnership is a business run by two or more people with the aim of making a profit. It is very simple to set up a Partnership in that no application needs to be made to Companies House, nor an appointment of directors or allocation of shares.
If nothing is in writing in terms of the structure and internal workings then the Partnership will be governed by the Partnership Act 1890. This is referred to as a ‘Partnership at will’.
This is not ideal as the Act treats all the partners equally (which you may not necessarily want) and should one partner wish to leave, or the other partners wish to remove a partner, it will bring the whole Partnership to an end.
However, the advantages of a Partnership as a business structure are that it is quick to set up, no fees are payable as there are with a limited company (because there is no ‘incorporation’) and there is no liability for corporation tax.
Instead, each partner is required to pay income tax on any profits and capital gains tax will be payable on any gains when assets are disposed of.
Running the Business - It is always advisable that a written agreement is drawn up. This can be done by way of a Partnership Agreement setting out the important terms such as profit sharing, ownership of assets and what will happen when a partner leaves or is expelled.
Bringing the Partnership to an End: A Partnership can come to an end in 3 ways:
- Under the Partnership Act 1890;
- Under contract law;
- By way of a court order
There are certain ways in which a Partnership may be brought to an end under contract law and these include; where the partners all agree, where there has been misrepresentation and where there has been a breach of the Partnership Agreement.
For more information on how we can assist with protecting you and your business, please contact us at firstname.lastname@example.org
IT IS ALWAYS ADVISABLE THAT A WRITTEN AGREEMENT IS DRAWN UP
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