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Whatever the size of your business, if you operate as a partnership or LLP you should have a members’ or partnership agreement in place to protect all parties. Our team are happy to help with this and offer regular reviews to ensure you’re fully compliant with the latest changes in the law. We’re also on hand with practical solutions and advice should any issues occur during the lifetime of the partnership or LLP.

Partnership act definition

The Partnership Act 1890 defines a partnership as the relation which exists between persons carrying on a business in common with a view to profit”.

Consequently, whether a partnership exists is a matter of fact. Simply using the term ‘partnership’ does not establish a legal partnership unless there is a joint business activity conducted with the intention of making a profit.”. A partnership comes into existence through a continuing relationship. The courts will consider the substance of the arrangements and not just the stated intentions of the parties when considering whether a partnership is in existence.

It is important to note that a partnership has no separate legal identity, it is the collection of its partners. Partnership contracts involve partners who bear joint and several personal responsibilities for the partnership’s liabilities. The acts of one partner, in the name of the partnership, will be binding on all of the partners.

Partnership agreements – unincorporated partnerships

The law surrounding unincorporated partnerships can be complex and can become problematic if you do not have an appropriately drafted and up to date partnership agreement. Without a partnership agreement, your partnership will be governed by the Partnership Act 1890, which is unlikely to reflect the terms you want to apply to your partnership. For example, the Partnership Act:

  • Assumes equality of capital contributions and sharing of profits and losses.
  • Presumes equal ownership of all partnership assets, which may not align with the actual contributions; a partnership agreement is essential to clarify ownership.
  • Implies various operational rules for the partnership in the absence of explicit agreement.
  • Applies uniformly to all partners without considering individual circumstances.
  • Is antiquated and lacks provisions for modern business practices frequently utilized in contemporary partnerships. For instance, it permits a partner to dissolve the partnership at will, leading to substantial and unfavourable liabilities and tax ramifications for both partners and the business.

In addition, in the absence of a partnership agreement, disputes may arise over ownership division, the roles and responsibilities of the partners and the division of assets upon termination of the partnership.

Our specialist team’s extensive knowledge and experience of partnership law, including the intricacies of the Partnership Act 1890, and drafting partnership agreements is invaluable to resolve and prevent any issues that may occur throughout the life of the partnership, including dissolution and throughout disputes.

What is a Limited Liability Partnership (LLP) and how is it different to a general partnership?

LLPs are effectively incorporated partnerships established under the provisions of the Limited Liability Partnerships Act 2000 (LLP Act). An LLP has many of the features and flexibilities of a partnership but there are two very significant differences:

  • An LLP is a corporate body with a separate legal identity. It can enter into contracts in its own name;
  • An LLP has limited liability. LLP members are liable only up to the amount of their capital..

Members’ agreements – LLP

An LLP requires at least 2 members. Like a general partnership, LLP members need an agreement defining their roles, duties, and entitlements. The LLP Act specifies that members’ rights and duties are subject to their agreement or, in its absence, the LLP Regulations 2001.

Without a members’ agreement, the LLP Regulations, which are unlikely to reflect the terms you want, govern your LLP by default. example, the default provisions of the LLP Regulations in respect of capital contribution and entitlement, profit sharing and decision making are unlikely to reflect the terms that you want to operate in practice.

How our partnership lawyers can help

Our specialist commercial lawyers have experience in all areas of partnership agreements and members’ agreements including drafting bespoke agreements and offering regular reviews to ensure you are fully compliant with the latest changes in partnership law.

We advise on all areas of any partnership or members’ agreements, including:

  • financial provisions;
  • Decision making;
  • Roles;
  • Financial reporting;
  • Entitlements;
  • Duration;
  • Resolving disputes; and
  • Procedures for appointment and retirement of partners.

For expert advice on partnership agreements, contact our Corporate & Commercial Team. Our team are ready to assist with your legal needs. Email us at

Frequently Asked Questions

The short answer to this question is yes. It is extremely important to have a partnership or members’ agreement. Without a partnership or members’ agreement, your partnership will be governed by the Partnership Act 1890 (“the Act”) or your LLP will be governed by the LLP Regulations, neither of which are likely to reflect the terms you want to apply to your partnership or LLP. The Act and the LLP Regulations are limited in scope and treat all partners/members equally. The Act is also archaic, due to its age, and therefore does not meet the needs of modern business practices regularly used in partnerships today.

Whilst the content of a partnership or members’ agreement differs for each partnership or LLP, there are certain factors that should always be contained within a partnership or members’ agreement. These include: financial provisions; decision making, roles, financial reporting, entitlements, duration, resolving disputes; and procedures for appointment and retirement of partners/members.

Corporate & Commercial

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