Why do I need a partnership agreement?

A description of the benefits of creating a Partnership agreement and the effects on your business of not having a documented agreement

While there is no legal requirement for a partnership to put a partnership agreement in place, the majority do tend to use them to define specific details of their partnership, such as:

  • Varying degrees of capital contributed
  • Profit (and loss) sharing
  • How the business will be run
  • The amount partners can withdraw from the business
  • The procedure should a partner become ill, die or want to leave the partnership for any other reason
  • The procedure for introducing new partners

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A partnership can be formed by two or more people agreeing to form a partnership. However, without a partnership agreement, the business will be governed by the Partnership Act of 1890, which may produce unforeseen or undesirable results, particularly if there is a future disagreement between partners.

The information on this page applies to England and Wales only.

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