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It is important to have a Partnership Agreement between you and your partners to set the business conduct of a Partnership. A Partnership Agreement is necessary as a foundation of your business partnership, ensuring that your interests, and that of your partners, are aligned and protected. Apart from reflecting clearly what business terms the partners agree on, a Partnership Agreement also provides guidance to mediate any disputes that may arise.
Use this Partnership Agreement if:
- You are entering into a Partnership and will like to lay down the rules of the Partnership.
What does the Partnership Agreement cover?
- Partnership name and business address;
- Names of the partners;
- Effective date of agreement, and commencement of Partnership;
- Maintenance of the Partnership account;
- Duties and limitations of each partner;
- Sharing of capital and property, profit or losses;
- Operation of partner’s shares;
- Rules governing dissolution of the Partnership;
- Terms concerning retirement, death, or expulsion of a partner; and
- Dispute resolution.
Other names for Partnership Agreement include:
- Partner Agreement; and
- Partnership Contract.
What is the difference between a Partnership Agreement and Joint Venture Agreement?
A Partnership Agreement is an agreement that ensures your interests, and that of your partners, are aligned and protected. It also provides guidance to mediate any disputes that may potentially arise. A Joint Venture Agreement is a type of a Partnership Agreement. Whereas the Joint Venture Agreement is a legal relationship which may be formed informally, however, the essential terms should be set out in a written Joint Venture Agreement.
Do I need a Partnership Agreement to start a business with a partnership structure?
A partner agreement is not necessarily needed to form a Partnership Agreement. However, in order to ensure that you and your partner are protected against certain circumstances that may arise through business enterprises, it is essential that you have a Partnership Agreement to prevent any possible situations from escalating. The Partnership Agreement sets out each partner’s legal obligations, to both each other and the business, and can also provide an exit strategy for a partner in the instance they might want to exit the partnership. With this is mind, the importance of a Partnership Agreement is emphasised, as the varying unknown circumstances within day-to-day business are ever-changing and growing.
How long is a Partnership Agreement effective for?
Partnership Agreements can either be indefinitely effective or include a specified termination date. Either side of the partnership can look to have the agreement dissolved providing they abide by the outlined notice period.
A partnership can also come to an end in circumstances such as when a partner is legally unable to remain a partner, this can be the case through death or a court order.
What laws are applicable to a Partnership Agreement?
Various forms of legislation, such as the Partnership Act (1963) and the Corporations Act (2001), are applicable and regulate the terms of a Partnership Agreement. Contract Law is also applicable for partnerships agreements, as contracts create the terms of the contract which forms the Partnership Agreement.
How do the laws for Partnership Agreements vary between states?
Each state has its own overarching laws that govern Partnership Agreements. Although some laws within each states legislation varies, the general regulations retain the same structure as to how a Partnership Agreement should be formed. However, if you are looking to expand your company through to other states within Australia, it is important that you understand these differences as it may end up hurting you business in the future if you do not take the time to consider these differences. To fully comprehend the differences within each States Act, it is important that you hire a lawyer who will be able to explain these differences and how they will impact your Partnership Agreement/s in other states. It is beneficial to hire a lawyer, as they will be able to inform you of these changes and effectively implement for you and your company.
How can a Partnership Agreement be terminated?
In order to dissolve a Partnership Agreement, a partner usually will give written notice to all the other partners making known their intention. Typically there will be a notice period dictated by the Partnership Agreement that has been agreed upon by both parties.
In the case of bankruptcy or death of a partner, the partnership ends from the date of bankruptcy or death. A partnership can also be terminated in the case of illegal conduct within the partnership. In some instances, a partner may need to apply for a court order to remove a partner. This happens in cases where the partner could be mentally or physically sick and is unable to perform their job.
What can I do if there’s a breach of a Partnership Agreement?
The best thing you can do is get in contact with a lawyer. Seeking legal advice as soon as possible is one of the most important things to do when a breach of a Partnership Agreement occurs. Whether your agreement is in contract form or not, a lawyer will be able to help you in whatever the instance may be.
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