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Partnership Agreements

The Managing Partner of the Practice used to regularly give lectures on Partnership. He used to break those lectures into 3 parts:-


  1. Getting into the Partnership;
  2. Getting out of the Partnership; and
  3. The bit in-between.

Notwithstanding the breakdown of the lecture into 3 key elements, Partnership arrangements are often a more cost efficient way of proceeding with a business venture with friends and/or acquaintances.  Partnership arrangements are often considered more favourable than a Company formation arrangement, given that the ongoing compliance obligations and costs are less and the business of the Partnership is not subject to detailed aspects and facts of the business being filed as a public register at Companies House.

The main draw back of Partnership arrangements is that partners are jointly and severally liable for the acts and/or omissions of their fellow partners incurred in the course of the business.  It is crucial to ensure that if you are going into partnership with another that you are confident that your fellow partners are competent and that you trust them fully, given that there is otherwise the risk that you may be liable for their incompetence by way of negligence actions or for any frauds they commit.

The alternative is ensuring that you have sufficient insurance in place to protect against any such claim.  It does, however, need to be appreciated that that insurance would not provide, in most cases, cover for frauds committed by fellow partners, although some insurers do now provide insurance for liability incurred as a consequence of fraudulent acts committed by another partner(s).

Partners need to appreciate that they do not derive any employment rights, which would include maternity pay, which employees would be entitled to after they have satisfied the required criteria.

The same considerations that apply to Shareholders Agreements also apply to the Partnership arrangement.




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