A partnership is a relationship between at least two parties that carry on a business in common with an aim to make a profit.
Some key features of a partnership that you should consider:
- Profits and losses are shared equally between the partners;
- Partners bear unlimited liability for debts and obligations incurred by the partnership. It is true that limited partnerships (as documented in agreement) can allow some partners limited liability;
- Each partner is an agent for the other(s). This means that they have the authority to bind them legally;
- Partnerships are assumed to be infinite. Unless provided for, the partnership agreement will die when a partner does. For this reason, it is important that the relationship is documented;
- A partnership implies a repetition of acts or business dealings, not a one-off deal, never to be repeated;
If you are thinking about operating as a partnership, it is vital that you formalize this through a formal agreement. Aside from the benefits discussed above, it can importantly save family relationships or friendships from breakdown in the event of a dispute.
If you have further questions, please contact frank@franklaw.com.au
This is not legal advice.