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New Partnership with no signed partnership agreement

New Partnership with no signed partnership...

Can anyone help. What happens if a new partnership has been set up (unicorporated) and no agreement has been formally drafted or signed. When I asked them if they had one they said that they could not afford an agreement to be drafted at present>

Thanks in advance for any advise.


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04th Oct 2011 11:24

Not necessarily needed


Whist always advisable a written partnership agreement is not legally required.  The Partnership Act 1890 automatically applies to all unlimited partnerships unless the partners agree terms which override those in the act (e.g. the act always assumes profits are split equally).

It is possible that the partners verbally agree overriding terms but in my experience this always ends badly and without any evidence of what was actually agreed you almost always end up reverting back to the act.  I would suggest getting them to have a look at PA1890 to see whether they are happy with the terms implied in it.

Hope this help.


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04th Oct 2011 11:43

That does help - many thanks

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04th Oct 2011 15:40

Get something in writing over a break up

Still makes me laugh to think we are relying on an Act that's 120 years old.

I have been through loads of partnership breakups (including my own) and the time, effort and anxt of a breakup with a partnership agreement is a 1/10th of what it is without one.

If nothing else get them to jot down what they would want to happen if one or both of them wants to leave.  In particlar over whether they want to value goodwill and if so, whether there's a formula they can agree (X x profits or turnover) or, if not, they can name a 3rd party to do or arrange a value, which they have to be bound by.

There should be a notice period required and if money is to change hands a timetable for payment, say over one or two years.

For a very small fee you can download template business docs (there are loads of them) from Simply-Docs I have tailored their partnership agreements in the past and they are fine.

There will be many who say that you should always use a solicitor to do these.  This may be the case but in my experience most of the document is commonsense and sometimes the fees and number of trees produced by a solicitor might be regarded as OTT.  I had an 80 page partnership agreement in my first partnership that had chapters on partners' holiday and pension entitlements but missed "what happens if a partner does a runner", which he did!

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06th Oct 2011 09:41

Just remember to disclaim liability

If you draft a legal agreement or suggest clauses you are stepping outside your area of expertise. This will generally invalidate your PI cover. So help by all means but always recommend that client sees a solicitor as you are not legally qualified or permitted to advice on contract or business law.


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06th Oct 2011 10:00

Good point Mark

Forgot that bit, absolutely, I always provide an agreement as specimen to act as a checklist of topics they will need to consider whan they see a solicitor, it's just that as I can never recommend a solicitor they usualy end up signing it anyway. 

PS: In the past, when I did have solicitors I could recommend, I found they were more of a risk to my wellbeing than doing the bl**dy agreement myself....sorry I'm sure I've just been unlucky, as I have been with bank managers, IFAs and bookmakers.

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07th Apr 2012 15:56

I have a partnership agreement for you to use if you wish, it is the one I drafted for me and my business partner. Let me know if you would like, and I will give you my email address.


Have a tubular day,





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