A business partnership is when two or more parties come together to own and operate a business. A Partnership Agreement, also known as a Business Partnership Agreement or Partnership Contract, is a contract that spells out each partner’s rights and responsibilities, as well as profit and loss distribution. Sometimes, a person may want to join an existing partnership business and this new partner may bring extra money for investment into the business, but bear in mind that the profits may be split among all the partners, including the new partner, in accordance with any partnership agreement. In this article, how to join a partnership business, we take a look at the process involved and the options available to you.
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For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of joining a partnership business and partnership agreements, and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
What is the purpose of a Partnership Agreement?
To formalize the rules, obligations, and financial information applicable to a business partnership and its general partners, a Partnership Agreement is required.
In addition, because all partners have already agreed upon and signed the partnership’s terms, establishing a formal contract reduces the likelihood of future problems between partners.
What should you consider before joining a partnership business?
- Carry out thorough due diligence.
When it’s time to sign contracts and get down to business, make sure to contact former partners, business associates, and clients of the individual with whom you’re considering creating a partnership, as well as read comments on their social media profiles and run a Google search.
- Seek experienced legal advice.
Every aspect of a business relationship, including corporate objectives, liabilities, responsibilities, and expectations, should be recorded in writing.
- What is the Exit Strategy?
Planning an exit strategy at the outset of a business partnership may seem counterintuitive, but it should be done nonetheless. This strategy should also address the division of the company’s assets and the management of each partner’s portion of the firm in the case of the death of a partner.
- How will you and your assets be protected?
Regardless of whether you choose to incorporate or form an LLC, you must decide how to protect your money, house, and other personal assets from business-related liabilities.
- Be mindful of Your Firm’s Brand
Occasionally, joining forces with a partner after a business has already been established is more difficult than if the business had been founded jointly. Consequently, merging entities does not always result in merging identities. Never lose sight of who you are and what your company stands for.
What should your due diligence include?
- Are there any pending or outstanding lawsuits against the company, or is there a risk that such actions may be filed in the near future?
- Is there transparency when it comes to the financial condition of the organisation as a whole?
- Is there a suitable mechanism of internal control to prevent partners from committing fraud?
- Is the company’s value protected from uninterested or uninvolved partners?
- Are your capital contributions safeguarded?
- What are the tax consequences of your personal investment in the company?
Why Should you consider joining a partnership?
There are numerous reasons to consider joining a partnership and these can include:
- Create more business revenue and benefits.
- Expand your customer base and commercial relationships.
- Increase your social publicity and brand recognition.
- Share and obtain industry expertise and experiences.
Does the business need to notify HMRC of a new partner?
Partners are accountable for their own income tax and National Insurance payments. New partners are required to enrol in Self Assessment. HM Revenue & Customs (HMRC) does not need to be notified unless the partnership is VAT-registered. When a new partner enters a VAT-registered partnership, you must notify HMRC within 30 days. You may suffer financial fines if you don’t.
Any changes to a partnership should be reported to your solicitor and accountant, and the partnership’s bank should be notified if the partners have offered personal guarantees.
Reporting Changes to limited partnerships
When a member enters or exits a limited partnership or limited liability partnership (LLP), you must notify Companies House.
How we can help
We have a proven track-record of dealing with partnership agreements. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact Our Corporate Solicitors
It is important for you to be well informed about the issues and possible implications of joining a partnership business. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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