You can share all your business’s profits between the partners. Each partner pays tax on their share of the profits. These agreements and liabilities bind each partner, without limit of liability.
If there is no partnership agreement, a partnership is a partnership at will. The terms of a partnership at will are set by the Partnership Act 1890, whose terms make such a partnership insecure. Often a partnership agreement will set out alternative mechanisms to deal with the death, retirement or expulsion of a partner.
Ex-partners may continue to be liable for debts incurred while they were still partners. There are a number of mechanisms to deal with this: novation, notification of retirement and indemnity.
A partnership may be dissolved out of court, by notice or the operation of the partnership agreement. It may also be dissolved by the court, for example where a partner has been in wilful and persistent breach of the partnership agreement.
Responsibilities of a partnership comprise:
Advantages
The advantages of a partnership include the benefit of not ‘going it alone’. It enables individuals with key skills and strengths to focus on their areas of speciality, and areas of individual weakness to be passed over to the partner that is more adept at managing a particular area. This type of business structure is relatively easy to establish.
Disadvantages
The disadvantages include having to agree with other partners for key business decisions; therefore, there is a risk of disagreements. Each partner is an agent for the other partner(s) and therefore, is liable for the actions of the other partner(s). Liability also extends to debts: each partner is liable for both their own share of debts, as well as the partnership’s debts as a whole. Thus, the primary disadvantage of a partnership business structure is that the liability of partners for the debts of the business is unlimited.
