Partnerships – the essentials for Business Start-ups
By Neil Butler, Solicitor , Thurles
A Partnership is where two or more people come together in business , with the common aim of making a profit.
It does not need to have a document in writing setting out the terms agreed between everyone – the Partnership Act governs things and even implies certain formal Terms , unless they are excluded by a written document signed by the Parties.
Not all of these implied Terms might suit your arrangement and can even cause trouble for the business.
So, it is very important that you and your partners get legal advice at an early stage.
Such advice will likely result in the completion of a formal Partnership Agreement. It will address many issues – very similar in fact to those for a new Company.
Examples of the questions to be answered are :
- Who gets what percentage of the company or business shares?
- Is the share ownership based on money introduced?
- What assets or cash does each Subscriber contribute or invest?
- Does the number of shares held by people increase based on continued participation in the business over a stated period of time?
- What are the roles and responsibilities of the each of you and your colleagues as Subscribers?
- If one Subscriber leaves or dies, does the Company or the other Subscribers have the right to buy back that person’s shares? At what price?
One of the key elements of a Partnership is that ALL partners are jointly and severally liable for the acts of the others. For example, the business has a bank loan of €10,000 ; each Partner is liable for the entire 10k and not just a share of it.
The same applies to all Contracts entered into by the Partnership.
So it is very important that there are clear rules agreed about who in fact can bind the business to expense; to delivery dates; to priority in delivery etc.
Unlike with a Company , liability in a Partnership is unlimited as it is with a Sole Trader.