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The Dangers of Not Having a Partnership Agreement

It is very easy to set up a partnership and even just an oral agreement can be sufficient to form a partnership arrangement. The law says that a partnership is quite simply the relationship which subsists between persons carrying on a business with a common view of profit. So even you and your friend gardening together and dividing the profits could mean that a partnership has been formed. A partnership is governed by a partnership agreement and would regulate the powers and duties of the partners in relation to the business. It could also dictate the way assets or liabilities are divided upon dissolution of a partnership. However, if a partnership agreement has not been drawn up, then the powers and duties of the partners is regulated by the Partnership Act 1980. This legislation does not cover all circumstances and eventualities, and as such partners can find themselves stuck in a situation where there is no legal recourse. Below are two of the many dangers that you could face if you conduct your business without a formal partnership agreement.

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