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We now offer services in the area of Business Law in both Southall at our Lady Margaret road Legal Centre and also at our Brent Cross Gardens Legal Centre. In this article we discuss what is a partnership, setting up a partnership, formalities required by law and the law of partnership in joint ventures.

Where two or more persons wish to establish a business relationship between themselves without becoming a company, partnership is only one of a number of possiblities. Other possibilities include the relationships of employer,principal and agent, franchisor and franchisee. Partnerships are governed by the Partnership Act 1890.

What is a partnership?
A partnership arises where two or more persons agree that they will run a business together and actually do so.
a)A partnership can be created; for a specific purpose or for a predetermined period of time; or
b) so as to continue for as long as the parties want- a partnership at will.

The persons in partnership would usually be people but they could be two or more companies. This could be the case where companies form a joint venture, often specifically to take on a new project.

Fundamental characteristics
Typical rights and responsibilities of partners which are fundamental to the relationship include:

(a) the right to be involved in making decisions which affect the business;
(b) the right to share in the profits of the business;
(c) the right to examine the accounts of the business
d) the right to insist on openess and honesty from fellow partners
e) the right to veto the introduction of anew partner
f) the responsibility for sharing any losses made by the business

Setting up a partnership
There is no necessary formality. However a written agreement is invaluable as evidence of the relationship and of its terms. It is also useful for the partners to have a written 'constitution' to which they may refer. It may among other things provide solutions to possible disagreements or disputes and thus perhaps avoid future litigation. It also helps in ensuring that the undesired aspects of the PA 1890 have been in fact avoided.

Other statutory obligations
Other obligations concerning income tax (or corporation tax, where the partners in a joint venture are companies), VAT and national insurance. A partnership will have the additional obligation, in this context, of notifying HM Revenue and Customs of the identity of the partners.

Lady Margaret Road and Brent Cross Legal Services can help you draw up a partnership agreement which will be legally enforceable in the courts in England and Wales.