The need for a written partnership agreement in any partnership is crucial.
Because if you do not have one, then the Partnership act 1890 will govern your relations with your partner.
Partnerships are an important part of business life in Ireland for a number of reasons.
1) any time 2 or more people come together to carry on business and do not form a company the law assumes they are in partnership.They are then subject to partnership law which dates back to the Partnership Act of 1890.
2) Professionals such as doctors,lawyers,dentists,vets,accountants are not allowed to form companies.
3) There are advantages over forming a company from the point of view of tax, accounting and disclosure requirements.
Unlike a company a partnership is not a separate legal identity which means that partners have unlimited liability, unlike directors or shareholders in companies.
And partnerships do not have to go through any registration process to be formed.
The downside is that each partner is liable for the losses of his co-partner in carrying on the partnership business, even where the other partner has defrauded clients of the business.
What is a Partnership?
Partnership Act 1890 defines a partnership and essentially states that where 2 or more people carry on business with a common view of profit, then a partnership exists.
A written partnership agreement is not necessary.
And where 2 or more companies come together to carry on business to make a profit then unless they have set up a special purpose joint venture company a partnership will be deemed to exist.
However it is important to note that Co-ownership of property alone does not mean that a partnership exists; there must be a sharing of any profits between partners.
Generally the maximum number of partners allowed is 20;however there are exceptions made for solicitors and accountants.
Why is it important to have a written partnership agreement?
Because if there is not either an implied or express agreement the partnership will be considered in the eyes of the law a partnership at will and will be governed by an act from 1890….which in most cases is wholly inappropriate for modern business.
For example without a written partnership agreement the 1890 Partnership act will mean that
1)there is no right to expel a partner
2)any partner may dissolve the partnership
3)if a partner dies, the firm will automatically dissolve
4)there is no power to retire under the Partnership act.
These are pretty crucial reasons for partners to set down their agreement and understanding in a written partnership agreement.