A partnership agreement records how partners in a jointly owned business will share profits, losses, capital contributions and decision-making, and what happens if a partner leaves or the partnership dissolves.
What it means
Without a written agreement, a partnership still exists in law once two or more people carry on business together for profit, but disputes over profit share, authority or exit terms are far harder to resolve without one.
Where it fits in
Partners are not employees of the partnership and are not on its payroll for their partnership share, but a partnership that employs staff still runs a normal payroll and PAYE process for those employees, separate from how the partners themselves are remunerated.
Key rules
- Governs profit/loss sharing, contributions and decision-making between partners.
- Not legally required to exist, but reduces dispute risk significantly.
- Partners are not employees of the partnership for their partner's share.
- A partnership employing staff still runs ordinary payroll for them.
