Why you should consider a formalised partnership agreement

You should consider a formal partnership agreement because it can define your business agreements and prevent future disputes.   

A partnership can be a step-up from being a sole trader. A partnership occurs when two or more people run a business with the aim of making a profit. 

In a general partnership all the partners participate in the daily running of the business. A limited partnership offers more flexibility. For instance, you can create an arrangement so that at least one general partners controls the daily operations and is personally liable for business debts. The other passive partners, called limited partners, can contribute in pre-defined ways. 

The advantages of such an arrangement are:

• It can be inexpensive to set up;
• A partner’s share of the business’s tax losses may be offset against other personal income, subject to certain conditions;
• There may be more opportunities for tax planning (such as income splitting between family members) than offered in a sole trader structure.
• It can be easy to dissolve the partnership or to resign and recover your share.

If you have further questions, please contact frank@franklaw.com.au

This is not legal advice.