A partnership can form either explicitly (through a formal document), or implicitly (through the informal actions of the parties).
A partnership is a relationship between at least two parties that carry on a business in common with an aim to make a profit. The court looks to the ‘substance’ of what the relationship is between the parties and, if there is sufficient evidence, an informal partnership will be recognised as if there was a formal agreement in place.
When deciding what structure to use for your business, a formal partnership agreement can be useful because it clearly defines the roles and responsibilities of all the parties. This is vital in outlining who can use the funds of the partnership and in helping to resolve any disputes between partners.
Another benefit of a written partnership agreement is that it deals with the duration of the agreement or what happens if a partner dies or is incapacitated.
Don’t leave it up to an outsider to decide.
If you have further questions, please contact frank@franklaw.com.au
This is not legal advice.
Written by Tim Cargill & Zdenka Marinov and edited by Andrew Graham.