Partnership Contract - Question

sgx.saint

Hello.

Myself and a good friend of mine are looking at starting a business together that will trade only via a website.

I have known my friend for well over 12 years and I trust him implicitly, however we both still feel that we should have some partnership agreement in place where it clearly states that we are both joint owners of the company and are therefore entitled to half the company and its profits.

Can we draft a contract ourselves that would be legally binding, or is it absolutely essential to use a Solicitor.

Our overheads and startup costs are quite low and if we can avoid spending money on a Solicitor then it would be a big help.

I appreciate any input.

Fritha_2

I've had a look on business link as I was sure I'd seen something about this:

http://www.businesslink.gov.uk/bdotg1/action/layer?topicId=1073864308&r.s=sl

Disputes between partners can cause difficulties, and the partnership may have to be dissolved if one of its members resigns or dies. It's possible to avoid this kind of problem by drawing up a legally binding partnership agreement, but you will need to pay a solicitor to do this.

jmarko

If it were me, I'd use a solicitor unless you are an expert in partnership law. But I would say that!

Pennywise

There is no "legal" reason to use a solicitor - such an agreement doesn't have to be a deed or witnessed, but a solicitor will probably come up with a lot more issues than you can think of and it will always be the "unexpected" that causes you a problem, not what you have foreseen!

As a basic guide, I would want a partnership agreement to:-

1. Be clear as to the roles and duties of each partner, and the respective working hours. (Many p'ships split because one perceives the other not to be working as hard yet earning the same profits!).
2. Be clear as to how one partner can leave the partnership and how the value of the partner's share would be determined. Also, whether the remaining partner has first option to buy the other's share, and if so, a clear route for how that is to be paid for, i.e. instalments, etc.
3. Be clear as to what happens if one partner dies or becomes incapacitated - i.e. do they still get a profit share if they aren't working? What rights would their next of kin have to force a sale or closure or take over the partner's profit shares, roles and duties?

If you are absolutely sure you have thought of all possibilities and can agree the resultant actions for each, without professional help, then just write it all down and sign it. From experience, if you properly think about the possibilities, talk about them and agree on a solution, then it is very unlikely that you'd have a problem later anyway as neither of you will be under any misapprehensions.

sgx.saint

Apologies for the epic delay in replying to this thread, however I have been absent from MSE for a good few weeks now due to personal issues.

Thank you for all your advice so far, Pennywise, would a document drawn up and signed between both parties be legally binding and recognised by a Court?

I assume it would need witnessing by a third party.