A partnership agreement is not a 'one-size-fits-all' document. If you choose to enter into a partnership with one or more other persons or entities... chances are that some aspect of your agreement with the other partner/s will be unique to your partnership.
Partnership Agreement Lawyers NSW
For this reason, you should be wary of using a standardised template of a partnership agreement … even if it is attractively priced (free) and easily downloadable over the Internet. We guarantee such an agreement won’t adequately document the terms of your partnership.
Partnership agreements need to be prepared by someone trained in the art of crafting legally enforceable agreements… a lawyer.
We customise every agreement we prepare for our clients and tailor it to their unique requirements.
In doing so, unashamedly we are doing what is the right thing by our clients, with whom we want lasting and trusting relationships.
What is a partnership agreement?
A partnership agreement is a legally binding document that sets out an agreed upon arrangement between two or more persons or entities conducting business together.
Such an agreement formalises the expectations of the partners and is best created at the start of the relationship before a potential issue for dispute arises.
In fact, some people find the process of putting a partnership agreement together a great way to acquire a thorough understanding of what a partnership really is from both a practical and legal sense.
Note: A partnership agreement is not a joint venture agreement.
Your typical partnership agreement will deal with:
Joining / Starting Up
- What obligations the partners have to contribute to the working capital of the partnership
During – Work, Profit Splitting & Leave
- what obligations the partners have to work in the partnership;
- what entitlement the partners have to the equity and profit of the partnership;
- what entitlement do the partners have to drawings (regular income);
- what obligations the partners have to contribute further working capital;
- what entitlement the partners have to leave (including annual, sick and long service leave);
Finishing / Exiting – Retirement, Poor Performance & Death
- what the partners have to do to voluntarily exit or retire from the partnership entitlement, including providing a mechanism for valuing the partnership (exit provision);
- what the partners have to do to remove a non-performing partner from the partnership;
- what happens if one of the partners dies or become totally incapacitated;
Prioritise
The most important aspects of putting a partnership agreement in place are, in order:
- Agree with your partners “in principle” on the terms;
- Have the partnership agreement drafted by a lawyer so that it reflects the “in principle” agreement and complies with the law;
- Implement the agreement and effect any transactions, i.e. life insurance and TPD insurance policies.
Do the partners involved need to have a formal partnership agreement?
“I say yes, but that’s just my opinion… ultimately it is a matter for the partners involved to decide as there is no legal requirement to have a written partnership agreement.
The reason I say yes, is because a well thought out and drafted agreement, can save all the parties involved from a lot of uncertainty by providing clarity as to the rights and obligations of each partner. Not having a partnership agreement, in my opinion, doesn’t pass the sleep test, i.e. the uncertainty created by not having one is likely to eventually keep you awake at night.”
– Gavin Hanrahan, Partner
Is there a standard partnership agreement template I can use?
Yes. Do we recommend using one? No.
Standard partnership agreement templates can be found online via a quick search on Google. However, these basic templates are written with generic terms and conditions that are unclear, generalised and ambiguous. If you use one of these templates you run the risk of the agreement being unenforceable.
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