Many business owners who form partnership, genuinely believe in sharing business success at the beginning. Their starting point is emotional partnership, friendship, relationship and mutual respect therefore they feel they do not need a written “Partnership Agreement”.

It is true that all partners are “equally, collectively and individually” responsible for business debt and liabilities. In order words, if you are a 50% partner in a partnership, you are still liable for 100% business losses, borrowing, debt etc, if other partner fails to meet his or her share of liability.

It is also true that you do not need a written “Partnership Agreement” by law but it is wise to put the conditions of the partnership in writing setting out all conditions under which you have agreed upon to enter into business together.

 

As Accountant and Business Advisor, we have seen many business partnerships run into difficulties in good and bad business conditions. Partnership Act was written in 1890 and it states that each partner is entitled to share the profits of the business equally, regardless of the amount contributed. A partnership is automatically terminated on the death of a partner.

 

There are many common issues in a business partnership: