Things to Consider when Forming a Business Partnership
Forming a Business partnership often arises between two or more friends or relatives.
Whilst this may have some advantages, they are not easy to operate and the ‘mortality’ rate is quite high.
It has to be borne in mind that the environment of Business and its associated pressures, with finance and profit as key issues, is not the same as a relaxed social environment.
It is because of this that an Agreement or Deeds of Partnership should be drawn up, preferably by a Solicitor.
Although there is no legal requirement for the parties to enter into a formal agreement when forming a Business Partnership, it is advisable to formalise some of the duties and responsibilities before commencing the business.
A Business Partnership has no separate legal status.
The parties involved will have self-employed status and will have joint and several liability.
There will be no differentiation between the business assets and those of individual partners.
If the business cannot satisfy its creditors then they could make claims on partner’s personal assets.
The creditors can make a claim against one or all the partners and if one partner absconds, leaving the business in debt then the other partner(s) have to accept the liabilities.
The Partnership Agreement
If you are considering forming a business partnership, the following are some of the key points: –
- Name of the Partnership (if any) and business address
- Names and Addresses of all the parties
- Amount of Capital / Loans from the parties and whether any interest would be payable.
- How and when are the loans to be repaid
- Schedule of Assets to be introduced into the business by the parties
- Partners Specific Duties and Responsibilities
- Normal Business hours
- Partners Drawings (Wages) from the business.
- Whether or not the parties can draw monies from the business during the periods of absence or sickness
- Holiday entitlement
- Share of Profits and Losses
- Responsibility for maintaining the business records – book keeping, accounts, etc
- Bank Account – Signing of Cheques
- Running the business – Decision making procedure. Recording major business decisions
- Partner Leaving – Notice, Repayment of Loans, Assets from and to the partnership
- Procedures for dissolving the partnership
- Life Assurance – cover to ensure continuity of the partnership
- Period of the Agreement
- Procedure for changing the partnership agreement
Come and talk with us to see if this is the best way to set up your business. We love helping people like you with an entrepreneurial idea.