Partnership Agreements
Business & Commercial
Protect your business interests with a professionally drafted agreement
Entering into a business partnership can be an exciting and rewarding venture. When structured correctly, partnerships allow individuals to pool their skills, capital, and expertise to build a successful enterprise. However, without a clearly defined legal agreement in place, even the strongest business relationships can break down—potentially resulting in costly disputes or financial liability.
At Burgess Thomson, we specialise in drafting and advising on partnership agreements for clients across Newcastle and the Hunter Region. Our team can help ensure your business is built on a solid legal foundation, giving you clarity, security, and peace of mind from day one.
What is a Partnership Agreement?
A partnership agreement is a legally binding document that outlines the rights, responsibilities, and obligations of each partner in a business partnership. While verbal agreements or informal arrangements may seem sufficient at the start, they rarely provide the clarity required when challenges or disagreements arise.
A well-drafted partnership agreement helps define:
- The roles and responsibilities of each partner
- How profits and losses will be shared
- The contributions (financial or otherwise) each partner is making
- How decisions will be made
- Dispute resolution procedures
- How a partner can exit the business or what happens in the event of death or incapacity
Why You Need a Partnership Agreement
While partnerships are a popular business structure, they come with inherent risks—particularly the risk of joint and several liability. This means each partner can be held personally liable for the actions of the other partners or the partnership as a whole.
A partnership agreement can help protect against:
- Disputes between partners: Clear definitions around responsibilities and decision-making can prevent misunderstandings.
- Unequal workload or investment: Set expectations for financial contributions and day-to-day involvement.
- Unexpected exits or death: Provide guidance for buyouts, succession, or business closure.
- Profit sharing disagreements: Specify how profits and losses will be allocated.
- Personal liability: Limit financial exposure by clarifying obligations and risk management procedures.
Without a written agreement in place, your partnership will be governed by the default rules in the Partnership Act 1892 (NSW), which may not reflect your intended arrangement or be suitable for your business model.
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What Should Be Included in a Partnership Agreement?
At Burgess Thomson, we tailor each partnership agreement to suit your specific business goals and circumstances. While no two partnerships are the same, common terms in a standard agreement may include:
Partnership Structure and Purpose
The agreement should outline the legal name and nature of the business, the intended duration and overall purpose of the partnership, and the agreed structure—such as whether it is an equal partnership or one with fixed profit shares.
Capital Contributions and Profit Sharing
It should specify the amount each partner is contributing to the business, whether that be cash, equipment, intellectual property, or other resources. The agreement must also clarify how profits and losses will be divided, and include provisions around drawing income or reinvesting profits back into the business.
Roles and Responsibilities
The day-to-day roles of each partner should be clearly defined, including who has authority to make decisions about spending, signing contracts, or hiring staff. It should also set expectations regarding each partner’s time commitment and provisions for taking leave.
Decision-Making and Voting Rights
The agreement needs to detail how key business decisions will be made, what voting rights each partner holds—whether they’re equal or based on ownership percentage—and how any decision-making deadlocks will be resolved.
Dispute Resolution Procedures
It should set out the process to follow if disagreements arise, including whether partners will be required to engage in mediation or arbitration before pursuing court action.
Exit Strategy and Termination
The agreement must explain what will happen if a partner decides to leave the business, including how their share will be valued and purchased. It should also include procedures for admitting new partners or selling the business in its entirety.
How Burgess Thomson Can Help
With decades of experience in commercial law, Burgess Thomson is one of Newcastle’s most trusted legal firms for partnership agreements. We provide:
- Personalised Legal Advice: We take the time to understand your business and create a tailored agreement that meets your needs.
- Clarity and Simplicity: Our agreements are drafted in plain English to ensure all parties fully understand their rights and obligations.
- Future-Focused Planning: We consider what may go wrong and ensure your agreement provides practical, enforceable solutions.
- Ongoing Legal Support: Our team is available to review and update your agreement as your business evolves or new partners come on board.
Whether you’re forming a new partnership or formalising an existing one, we’ll help you put the right structures in place from the start.
Why Choose Burgess Thomson?
- Experienced Business Lawyers:We’ve helped countless clients across Newcastle structure their partnerships for success.
- Attention to Detail: We carefully consider all legal, financial, and operational aspects of your agreement.
- Client-Focused Service: Your goals and concerns are our priority.
Speak to Our Partnership Agreement Specialists Today
Starting a business with others? Protect your interests and avoid future disputes with a properly drafted partnership agreement from Burgess Thomson.
Lay the foundations for a successful and secure business relationship—partner with confidence, with Burgess Thomson by your side. Contact us today.
FAQ's
What if I want to leave the partnership after an agreement is in place?
Generally, this will be covered by a partnership agreement in the form of steps required to relinquish your position. If the partnership is to be completely dissolved, this too should be covered by the agreement. An effective partnership agreement will also protect you against personal claims from other partners in the event of a dispute. When deciding to relinquish your position it is important you notify all relevant parties and assist the other partners in taking on the responsibilities and obligations previously allocated to you.
What if we want to change our business structure to a company?
This process is not as complicated as you might think, and with legal assistance can be a smooth transition. The process involves two basic steps – dissolve the partnership; and establish the company. The process for dissolving the partnership should be covered by your partnership agreement. After this is completed by the relevant parties, partnerships will generally have to cancel their ABN and deal with existing arrangements involving the partnerships, for example if they will be transferred to the company or terminated. To form a new company you will need to complete the relevant forms and lodge them with ASIC to be registered, accompanied by the associated fees. It is also important to be aware of the tax obligations of this decision.
How is a partnership different to a joint venture?
A joint venture involves individuals working together towards a shared goal whilst maintaining their separate businesses. Common joint ventures include property developments or franchising agreements. Joint ventures also usually terminate once the goal of the venture is reached, say the property has been developed and sold. Conversely, partnerships are ongoing relationships where each partner is jointly responsible for the activities of the partnership. A key difference is that a partner will be liable for other partners if they cannot pay their debts. This does not occur is joint ventures, each party is liable for their own debts.
