Partnership Agreement Solicitors
Our solicitors provide expert advice on partnership agreements and the legal issues
that arise throughout the life of a partnership.
Why a Partnership Agreement Matters
The Partnership Act 1890 was written before most modern businesses existed. It treats all partners as equal regardless of their contribution, requires unanimous consent for many decisions, and allows any partner to dissolve the entire partnership simply by giving notice. If that is not what you intend, you need a written agreement that overrides these defaults.
A well-drafted partnership agreement will address every foreseeable scenario: how profits and losses are shared, how the partnership is managed on a day-to-day basis, what happens if a partner wants to leave or retire, and what happens if the partners cannot agree on a major decision. Getting these terms clear at the outset costs a fraction of what a dispute costs later.
What a Partnership Agreement Should Cover
Every partnership is different, but a comprehensive agreement will typically deal with the following:
- Capital contributions — how much each partner is contributing at the outset, whether additional capital can be required, and whether contributions earn interest
- Profit and loss sharing — the ratio in which profits and losses are divided, and whether any partner is entitled to a salary or guaranteed drawing before profits are split
- Decision-making — which decisions require a majority and which require unanimity, and how disputes between partners are resolved
- Partners’ duties — the time commitment expected of each partner, restrictions on outside activities, and non-compete obligations
- Admission of new partners — the process for bringing in additional partners and whether existing partners have a right of veto
- Retirement and resignation — notice periods, valuation of the departing partner’s share, and whether goodwill is paid
- Expulsion — the grounds on which a partner can be expelled and the procedure for doing so
- Death or incapacity — what happens to a deceased or incapacitated partner’s share and whether the partnership continues
- Dissolution — the circumstances in which the partnership can be wound up and how the assets are distributed
Partnership vs LLP vs Limited Company
Before drafting a partnership agreement, it is worth considering whether a traditional partnership is the right structure for your business. A limited liability partnership (LLP) offers partners the flexibility of a partnership with the benefit of limited liability, meaning that partners are generally not personally responsible for the debts of the business beyond what they have agreed to contribute. A limited company offers a more formal governance structure and may be preferable where external investment is anticipated.
We can advise you on the relative merits of each structure before any documents are drafted, so that you are confident the vehicle matches your long-term business goals.
Partnership Disputes
When a partnership breaks down, the consequences can be severe. Disputes commonly arise over profit sharing, the alleged breach of a partner’s duties, the forced expulsion of a partner, or disagreements about whether the partnership should continue at all. Without a written agreement, the courts apply the statutory default rules, which may produce an outcome that neither party wanted.
We advise partners in dispute on their legal position, negotiate on their behalf, and where necessary bring or defend proceedings. In appropriate cases, we can seek injunctions to protect the partnership’s assets while a dispute is resolved.
Why Choose Freeman Harris?
We are commercial solicitors with experience acting for business partnerships across a range of sectors including professional services, retail, property, and creative industries. We approach partnership agreements as practical commercial documents rather than legal formalities, and we focus on the scenarios that are most likely to cause problems so that your agreement addresses them before they arise.
Partnership Agreement Solicitors Team
Talha Fazlani
LitigatorTalha specialises in contract drafting and assists clients with effective collaboration agreements which protect their rights.Ian Freeman
Senior SolicitorIan has a great understanding of contract drafting especially for commercial purposes, and can assist SME’s with their legal needs.Lana James
ParalegalLana assists client with initial information gathering on contract services and negotiations with other parties.
Partnership Agreement Fees
Partnership Agreement FAQs
- Why is collaboration agreement necessary?
It is not obligatory to have collaboration agreements, but they are recommended. It is naive to rely on verbal reassurances when investing your time and money into a collaborative project and want to have the desired results or else end up in a commercial contract dispute. A legal collaboration agreement enables you to pursue legal action and have some resources to manage the risk if the collaboration does not go to plan. Though verbal agreements are also valid in court law, without written agreement it is hard to prove the intentions of the parties when the contract is drafted.
- What does collaboration agreement usually include?
The detailed collaboration agreement should include following essential elements:
Details and scope of the joint project:
A well-drafted collaboration agreement includes the specifications of the project and the obligations of all parties involved. The details and defining scope of the project ensures project parameters and minimizes the risk of any confusion arising later. As circumstances change, it would be beneficial to include a revision clause so that specifications can be amended as required.
Collaboration Period:
Add the term of the project to the main body of the agreement, along with the milestones and timings of the key deliverables. The collaboration timeframe can be fixed or ongoing until one party terminates the project.
Confidentiality, Non-Disclosure & Permitted Use:
In a joint venture, multiple parties share information as a part of a collaboration agreement. Every collaborator wants to protect confidential or commercially sensitive information, so the agreement should include a non-disclosure agreement and confidentiality provisions to build trust and facilitate open communication. For an undisputable collaborative agreement, it is recommended that the contract outlines to what extent parties can use any confidential information or collaborate with similar businesses competing with collaboration projects.
Intellectual Property Rights:
The nature of the project decides whether it is necessary to have detailed provisions on intellectual property in the collaboration agreement or make it part of the venture. Intellectual properties are of many types, including copyrights, trademarks, design rights, and patents. So, the agreement should protect the intellectual property owned by the participating parties before they sign the contract. Collaboration agreements often state the ownership of the intellectual property remains with the party who created and mentioned it in the collaboration. An IP license may also need to be issued to the parties, contractors, advisers, and consultants. The agreement should also cover how intellectual property will be treated if it is created during the project and also include provisions to deal with copyright or IP license infringement.
Reporting & Project Management:
Undeniably good collaboration depends on effective communication. Therefore, parties up for collaboration may want the agreement to set out formal reporting, high-level meeting schedules, and project management.
Payments & Funding:
Key provisions of the collaboration agreement must include how the project will be funded and the amount each party should contribute during the agreement. It is recommended to have provisions on:
- What if more money is needed than anticipated?
- What will happen if one party does not pay their agreed contribution?
- When can each party expect the turnover or get their initial contribution back?
- Penalties provisions in case of an agreement breach.
- Indemnity provisions deal with the loss that a party may suffer in certain aspects of the project. For instance, in a manufacturing project, a warranty could be given that the supplied products would match the relevant regulatory criteria, or else they would provide an indemnity.
Data Protection:
The collaboration agreement needs to cover data protection provisions and the processes of how personal data will be shared, used, stored, or transferred if shared as a part of a collaboration. Moreover, The Data Protection Act 2018 also imposes obligations on businesses to protect any information that may reveal an individual’s identity.
Disputes:
If a dispute arises between agreed parties, the collaborative agreement should outline the agreed dispute resolution process. Also, if all parties have an equal say in project decisions, then in case of deadlock parties should know the process of decision making.
Termination Plan:
The termination strategy in any project is the critical term of the contract. Before investing, each party should know what will happen if the project fails, stalls, and goes wrong. The provisions include the process for the parties who want to end the project before completion or tie them for a specific period before they can opt to terminate.
An agreement must have termination provisions if:
- If the project target is not achieved.
- If the other party violates the major agreement obligation.
- Notice of termination should be given.
- What are the advantages of collaboration agreements?
A collaboration agreement is effective for businesses to pool resources and expertise to achieve high economies, reduce costs, and mitigate risks.
It provides a transparent framework to define the partnership’s goals, objectives, and project scope. A collaboration agreement also outlines the responsibilities and specific activities that ensure alignment and collective efforts toward a common purpose.
A collaborative effort inherently involves sharing risks and rewards. It helps to mitigate potential risks by outlining mechanisms for sharing risks and dispute resolution procedures.
Collaboration agreements aim to access new customers and expand market reach. By partnering with other organizations, your business possesses complementary strengths or has a presence in different geographical locations to trap new customers.
Collaborating with reputable brands and well-built businesses can enhance your company’s image, customer loyalty, and reputation. A collaboration agreement ensures that the values, ethics, and quality standards safeguard the reputation and integrity of all involved.
- What are the tips for negotiating a collaboration agreement?
A collaboration agreement is a legal contract between two or more businesses that outlines their joint efforts to achieve common goals. In this commercial contract, parties can negotiate on terms they want to include in the agreement. Your ability to negotiate terms mainly depends on your bargaining power.
Some other vital negotiating tips for collaboration agreements are:
- Work out your key objectives and what you want in this collaboration.
- Make sure your agreement reflects your business needs and adapts to your industry or any industry regulations.
- Have a realistic approach in negotiations and focus on the incentives you require to make your collaboration a success.
- Ensure that your collaboration agreement clearly states who owns what at the end of the project.
- Taking time to formulate the negotiation details as a detailed collaborative agreement with all the essential elements reduces the risk of a dispute or involvement in commercial litigation.
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