Partnership agreements

There is no requirement in law for partners who are carrying on a business together to have a partnership agreement. A partnership agreement is a bit like a Will, while most people know that it is important to make one, it often gets left on the to-do list and the business carries on without the protection that a partnership agreement provides. A partnership agreement is a good way of setting out what will happen between the business owners in various scenarios that naturally occur in the life of a business.

Without a partnership agreement the business partners have to look to the Partnership Act 1890 – one of the oldest laws still in common use (which usually means having to consult a business solicitor). It can reduce the possibility of expensive and acrimonious disputes in the future.

A partnership agreement does not need to be registered anywhere once it has been signed by the partners.

Limited Liability Partnerships (LLPs)

LLPs have to be officially documented and registered at Companies House, unlike an unlimited partnership.

LLPs are a  popular business model offering a variety of benefits to individuals, including reduced personal liability for the debts of the business. LLPs has similar features to that of an unlimited partnership, however the key difference it the LLP has its own legal status.

The individuals are ‘members’ of the LLP, profits incurred in the LLP are split between the members, the responsibility of paying tax therefore falls on the members and not the LLP itself.

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