Partnership Agreement
Partnership Agreement
Perth Commercial & Corporate Lawyers
A partnership agreement in Western Australia is a contract that defines the relationship between partners in a partnership. At West Perth Legal, we assist business partners on a full range of issues relating to business partnerships, including:
- Drafting, reviewing and negotiating partnership agreements, tailored to your specific requirements
- Providing legal advice on existing business partnerships on issues such as exit strategy, and disputes
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Partnership Agreement
A partnership agreement is an agreement used for the establishment of a partnership. A partnership agreement defines the rights and obligations of the partners, which are subject to the Partnership Act 1895 (WA) and the Limited Partnerships Act 1909 (WA) in the case of a limited partnership.
The formation of a partnership is relatively quick and inexpensive. It allows multiple partners to combine their expertise, resources, and labour for the purpose of a business venture or activity. It should be noted, however, that a partnership is not a separate legal entity and, as such, each partner has unlimited liability for the debts and liabilities of the partnership, including for the actions of all other partners (except for a limited partnership to some extent).
Partnership Agreement Drafting Service
West Perth Legal assists clients prepare a partnership agreement to include key information such as:
- The business activity and common purpose of the partnership
- The conduct of each partner including obligations such as compliance with specific legislation, licenses, or professional associations rules
- The proportionate ownership of assets between the partners
- The distribution of profit and losses between the partners
- The maintenance of the partnership including financial accounts and tax obligations
- The retirement, removal or addition of a partner
Partnership and Tax
A partner’s share of the partnership income is generally taxed at the personal income tax rates of the partner. Accordingly, profits and losses, or capital gains made by the partnership, can affect a partner’s individual tax return. It is important to have a partnership agreement in place which considers potential tax liability or stamp duty liabilities. As such, we highly recommend that you seek tax advice from a qualified tax accountant in deciding whether a partnership is suitable for you.
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At West Perth Legal, we work with business partners to establish clear responsibilities and manage risks around partnership relationships.
Why are Partnership Agreements Important?
When two or more persons carry on a business in common with a view to profit, a partnership agreement establishes the partnership. This ensures that there is no dispute over the existence or terms of the partnership.
A partnership agreement clearly defines the roles, responsibilities, and expectations of each partner, the management structure and decision-making process. It ensures that every partner understands their obligations, which helps maintain accountability and balance within the partnership, reducing potential conflicts.
Financial disputes are one of the primary causes of partnership breakdowns. A partnership agreement outlines how profits, losses, and expenses are distributed, the capital contribution of respective partners, creating transparency and eliminating misunderstandings about financial matters.
The partnership agreement addresses each partner’s liability and indemnification process for payments made or liabilities incurred in the ordinary course of business. It outlines each partner’s duty to act in the best interest of the partnership and avoid conflicts of interest.
Disputes are inevitable, but a partnership agreement provides a structured framework for resolving disagreements, such as mediation or arbitration. This proactive approach ensures that conflicts are managed efficiently without jeopardising the business.
Without a proper exit strategy, partnerships can end on uncertain terms. A partnership agreement includes provisions for the withdrawal, retirement, or death of a partner, ensuring a smooth transition and protecting the business from instability.
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