Partnership Agreements

Robyn Shepherd | SchoemanLaw Inc  

Category: Commercial Law 

A partnership is concluded through a contract between two or more individuals. There is no limit on the maximum number of individuals entering an agreement. A partnership is not a separate legal entity except for certain purposes. Further, if one of the partners dies, the partnership dissolves and therefore does not enjoy perpetual succession 

Requirements of a partnership 

The first requirement is that every partner must agree to contribute towards the partnership. This contribution can be of commercial or economic value to the partnership. An example herein is labour, cash, assets or skills. A contribution is an undertaking by each partner that one will contribute towards the partnership.  

The second requirement is that the contractual partners must undertake to carry on business together and for the mutual benefit of the partners. "Business" refers to any activity undertaken to make a profit. The partners must agree that they will conduct this business together. It is not sufficient to put assets together so that each person can use them for their own purpose.  

The third requirement is for the parties to agree to conduct the partnership in a profitable way. It does not mean that the partnership has to generate a profit, as long as the goal is for it to make a profit.  

The fourth requirement is for both individuals to have the intention to create a partnership. Therefore, the parties need to be direct and clear about their intentions and focus on concluding a partnership agreement.  

The fifth and final requirement is that the partnership must be lawful with a lawful purpose.  

Listed below are some of the things to consider to include when drawing up or discussing the Partnership Agreement: 

The name of the partnership The business that the partnership will be involved in Roles and responsibilities of each partner If they will be needed full-time How the profit and losses will be shared among partners Which of the partners will have cheque and purchasing rights Other specifications that might be unique to your startup 

There are certain rights assigned to partners when a partnership is concluded. Namely, when the partnership dissolves, each partner is entitled to a share of the partnership's assets in accordance with the partnership agreement. Further, when there are profits, each partner is entitled to his or her share of the profits per the partnership agreement.  

Conclusion 

To conclude, a partnership agreement is commonly used. However, those entering a partnership agreement must ensure all the essential requirements are met to avoid a partnership being deemed void. 

Robyn Shepherd | SchoemanLaw IncAttorneywww.schoemanlaw.co.za