What Is A Partnership Agreement

What is a partnership?
Partnership is a backbone of the economy. It plays a vital role in the economy. A partnership varies from business to business. The law which regulates the general partnership is Partnership Act 1890.
The consent of the all partners to enter into partnership agreement is necessary. Family businesses are often conducted in partnerships. All partners of the partnership must be of sound age.

Definition of partnership
A partnership explained in (1877) 5 Ch D 458, 472:

A partnership is a legal contract between two or more partners for carrying on commercial business with a view to earn and share the profit with another partner.

Business types
The main types of business structures commonly used by small business.ses are:
Sole trader: an individual trading on their own.
Partnership: an association of people or entities carrying on a business together, but not as a company.
Trust: an entity that holds property or income for the benefit of others.
Company: a legal entity separate from its shareholders.

Registration
Partnership agreement or deed of partnership does not require the registration and it avoids the legal formalities. It is very flexible.

Duration of Partnership
Partnership can be categorized as:
Partnership at will
Partnership for fixed term

If the partnership agreement does not specify the duration of the agreement then the any partner can dissolve the partnership by giving notice to other partner.

In partnership at fixed term the partnership dissolved after the expiration of the fixed term. In a fixed term partnership, a partner can only retire from the partnership with the consent of the other partners. Otherwise, he has to apply to the court under section 35 of the 1890 Act for the winding up the firm.

Fiduciary duties
It was held in the Carmichael v Evans [1904] 1 Ch 486 case that:

Partners place mutual trust and confidence in each other. They stand in a fiduciary relationship. A partner must display the utmost good faith towards his fellow partners in all partnership dealings. A partner owes his co-partners a duty to be honest in his dealings with third parties, even if the transactions are not of a partnership nature.

Written partnership agreement
It is the not requirement of the law that partnership agreement must be in written form. However it is essential to use written agreement to form a partnership. Written partnership agreement removes the uncertainty, misunderstanding between the parties. Courts always prefer the written agreement because written agreement reflects the intention of the parties.

Expulsion of the partners
Section 25 of the Partnership Act states that:
No majority of the partners can expel any partner unless a power to do so has been conferred by express agreement between the partners.

Advantages of Partnership
The major advantages of the partnership are:

Applicability of few government regulations;
tax advantages
share of profits and risk equally ;
more investment
privacy of information
inexpensive
more partners to share work load

Dissolution of the partnership
A partnership can be dissolved in number of ways. Such as:
By expiry of the tem;
By operation of the law;
By court;
bankruptcy or death of the partner

Net Lawman provides the comprehensive partnership agreement. Such as:

Partnership Agreement
A comprehensive partnership agreement suitable for businesses in any industry and with any number of partners. Written as a long form document it allows you to amend the default provisions of the Partnership Act 1890 and also provides additional terms covering how a modern day business operates.