Partnership Agreements

A partnership agreement is essential for setting out how a business partnership will operate, defining each partner’s rights, responsibilities, and expectations. Without a formal agreement, partnerships are governed by default legal rules, which may not reflect the commercial reality of your business.

Establishing clear terms from the beginning can prevent uncertainty, minimise disputes and ensure the partnership runs smoothly.

3 reasons you need a partnership agreement

1. Flexibility

Without a partnership agreement, the law imposes a default set of rules on your business. Whilst these may provide a basic framework, they can be rigid and impractical, often failing to reflect the way you actually operate.

For example:

• Decision making – Whilst everyday decisions can be made by a majority, significant changes (such as altering the nature of the business) require unanimous agreement. A partnership agreement allows you to tailor decision-making processes to suit your needs.
• Business continuity – Under the default rules, a partnership automatically dissolves if a partner dies or becomes bankrupt. A well-drafted agreement ensures continuity and safeguards the business for the future.

A partnership agreement gives you the flexibility to structure the business in a way that works best for all partners, avoiding unnecessary legal constraints or worries.

2. Protection for the partners

Unlike a limited company, a partnership does not have separate legal status, meaning partners are personally liable for the business’s debts and obligations. This means that one partner’s actions can create financial risks for the others. A partnership agreement can help to protect against this by containing rules around incurring liability.

3. Set expectations from the outset

A well-structured agreement ensures all partners have a shared understanding of how the business will operate. By clearly outlining responsibilities, profit sharing arrangements and dispute resolution mechanisms, misunderstandings can be prevented and clear expectations set.

Why 3volution and how can we help

A well drafted partnership agreement is a vital tool in protecting your business and ensuring its long-term success. At 3volution, we take a tailored approach, helping you put the right structure in place to meet your business’s unique needs.

Whether you’re forming a new partnership, restructuring an existing one, or bringing in a new partner, we provide clear, practical advice to help you make informed decisions. Our team works closely with you to ensure your agreement supports your commercial objectives and protects your interests.

If you’re considering a partnership agreement, we’re here to help. Get in touch using the form below to discuss how we can help.