Continuing our series “7 Reasons Why You Don’t Need a Partnership Agreement”, our in-house company law expert Spencer Laymond, has turned this subject on its head, to set out and defend seven reasons why you don’t need a partnership agreement.
If you missed the previous reasons they can be found here.
Reason 2 - It is reasonable for any one partner, at any time, to put the business into dissolution
Staying with the same doom and gloom theme of dissolution from Reason 1, if it perfectly reasonable for all the partners to walk around with full and unrestricted access to a nuclear button, a button which can be pressed at any time, a button which if pressed will kill the partnership immediately, irrespective of the circumstances and consequences to the business and other partners, then you may not need a partnership agreement.
Check the law yourself
Under the Partnership Act 1890, there are not one, but two sections that enable a partnership to be brought to an end by any partner at any time. These are sections 26(1) and 32(c). So without an agreement, any partner, at any time, for any reason, can immediately trigger the dissolution of the partnership, and its winding up.
However, even if you and your partners have all the trust and confidence in the world with each other, even if you are family or lifelong friends, to protect the business, to provide some assurance in the event of a change in circumstances, a partnership agreement will be required.
To stop your partners being free to carry the nuclear button to the partnership’s very existence, you will need an agreement that puts that button under a lock and key.
If you need guidance on this subject, get in touch with our team on 020 8363 4444 or complete our online enquiry form.
Next week – Reason 3 – Why You Don’t Need a Partnership Agreement
Don’t forget to tune into next week’s Reason 3 - You and your business partners are happy to divide profits and losses evenly, even if you have you contributed different amounts of capital.