Partnerships are formed by 2 or more people who decide to go into business together. A partnership can be general or limited in nature.
A general partnership is where all partners are equally responsible for the management of the business and its debts.
A limited partnership is where one or more of the partners is limited in their business liability to pay debts.
In partnerships it is crucial that a partnership agreement is created to outline the rules for such things as:
- how partnership disputes are to be determined;
- how proceeds and profits are to be divided;
- how any business debts or shortfalls are to be paid.
Without a partnership agreement you are left floundering with no documents to rely upon in the event of a partnership dispute.