A formal agreement between two or more persons for carrying on a business in a common with a view to earn a profit is called partnership.
Main types of Business structures
The main types of business structures commonly used by small businesses are:
• Sole trader: an individual trading on their own.
• Partnership: an association of people or entities carrying on a business together, but not as a company.
• Trust: an entity that holds property or income for the benefit of others.
• Company: a legal entity separate from its shareholders.
Every business has an advantages and disadvantages but you must prefer and consider such business structure that best suit with your business requirements.
Legal binding contract
A partnership is a legally binding contract, and it must be made to earn a profit. Partnership can involve up to a twenty members for carrying on a business with intention to earn a profit.
Written VS verbal agreement
The partnership law does not necessitate that partnership agreement must be in a written form. Partnership can be based on an oral agreement. However, a written partnership agreement minimizes the disputes between partners. The courts always prefer the written partnership agreement because written agreement demonstrates the clear intentions of the parties. It is advisable that parties must prefer the written partnership agreement in order to avoid misunderstandings. The written partnership agreement also provides to partners a clearer understanding of their rights, responsibilities and obligations as a partner. It is advisable to review your partnership agreement regularly.
Partnership Law
In Australia, each state has its own partnership law. Such as:
• ACT - Partnership Act 1963
• NSW - Partnership Act 1892
• NT - Partnership Act 1997
• QLD - Partnership Act 1891
• SA - Partnership Act 1891
• TAS - Partnership Act 1891
Advantages of Partnership
The major advantages of the partnership are:
• Applicability of few government regulations;
• tax advantages
• share risk;
• privacy of information
• inexpensive
• more partners to share work load
Non competition
The restriction imposed by the partnership law on the partners of the firm that they cannot carry on the same business as of the partnership without prior obtaining the consent of the other partners. If any partner carries on the same business then he is liable to pay all the earned profits from that business to other partners.
Partnership at will
No one can expel the other partner by a majority of the vote unless such power is bestowed by the partnership agreement. If the partnership agreement is silent about the duration of the partnership, then it is the right of the other partner to retire from the partnership by giving notice to another partner. The partnership agreement that does not define the duration of the partnership is called partnership at will.
Variation of terms of partnership
The mutual rights and duties of partners, whether ascertained by partnership agreement or defined by the Partnership Act, may be varied by the consent of all the partners, and such consent may be either expressed or inferred from a course of dealing.
Net Lawman provides the following types of partnership agreements. Such as
Business partnership agreement
This partnership agreement is suitable for all Australian partnership situations, whether you are architects, car sellers, farmers or builders. Having a partnership agreement in place is essential as it sets the terms for a sound business relationship.
Family partnership agreement
This partnership agreement is suitable for most partnership situations, whatever the business type. It matters not whether you are car salesmen, architects, cleaners, or accountants. It is less formal than many such agreements as it has been drafted specifically for family partnerships of any kind.
Admission of new partner
A simple agreement whereby the old and new partners are joined in the terms of the original partnership deed
Editors’ notes:
For more information please visit www.netlawman.com.au or contact Rashid Ramay on support@netlawman.co.uk
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