Why have a partnership agreement?
For anyone considering entering into a partnership, a partnership agreement is strongly advisable.
Without a partnership agreement, partners are ruled by the â€˜default provisionsâ€™ of the Partnership Act 1890 which can be very restrictive. For example, the default provisions dictate that all profits and losses are shared equally amongst partners and that no majority of partners can expel a fellow partner.
A partnership agreement allows partners to set out clearly how the partnership is to be managed, how profits and losses are to be dealt with, in what scenarios partners can be expelled and how to deal with the retirement or death of a partner. In this way, a partnership agreement allows you the partners to have full control of management of the partnership.