Our Gold Coast business lawyers regularly assist clients in forming agreements between two or more parties for the purposes of carrying on a business enterprise. While a partnership does not create a separate legal entity, they are often necessary where the parties have differing but complimentary skillsets and experience that together form the basis of a business.
Regardless of the types of entities entering into the partnership agreement, there are a number of standard provisions that any partnership agreement or deed should contain. These include:
- Basic names and details of the partnership and the parties to the partnership;
- Business purpose;
- Effective dates;
- The parties’ entitlements and obligations under the agreement;
- The capital contributions of the parties;
- How shared resources will be used;
- Retirement provisions (in the event of retirement or death);
- Rules governing how any disputes will be resolved; and
- Termination rights.
Experts in partnership agreements
Partnership agreements outline how the relationship between parties will interact with one another and their obligations in the broader context of a business venture. Partnerships are typically used for agreements between parties for operations more complex than running a sole proprietorship but not as large in scale ask a fully-fledged company. That being said, there are instances where companies themselves enter into partnership agreements.
Our Gold Coast business lawyers are well-versed in providing advice to clients planning on establishing ventures of sizes ranging from start-ups and small businesses to large corporate entities. We also assist with more complex arrangements like partnerships between trusts where the legal requirements become more detailed.
We can provide assistance on establishing a limited partnership where one or more parties is liable only to the extent of their capital contribution to the partnership and are also experienced in agreements that operate in similar fashion to partnership agreements such as shareholders agreements and unitholder agreements.
A shareholders agreement occurs when shares are owned in a company and the parties seek to ensure the fair treatment of shareholders. Parties to a shareholder agreement describe how a company will operate to protect the shareholder and outline their obligations. It also contains terms that regulate company management and shareholder privileges and protections. It is also important to regulate the sale of shares in the company and define how essential decisions will be made (for example it is usually the case that a general meeting of shareholders of a company will be required for important choices that can affect their shares).
Shareholders Agreements, while different, can be thought of as similar to a partnership agreement in that they also govern the relationship between two parties. Using a shareholders agreement to operate a quasi-partnership is not uncommon. Typically shareholders agreements that operate as partnerships also ensure employment for the shareholders and dictate the extent of their contributions to the business.
A unitholders agreement is typically used by unrelated parties who establish a unit trust for the purposes of co-owning assets. In order to ensure the rights and obligations of the parties are appropriately outlined, a unitholders agreement is used. A unitholders agreement operates in similar fashion to a partnership agreement.
Holding units in a trust is similar to holding shares in a company. In a unit trust, a unit entitles the holder to a certain portion of the trust property. Unitholder agreements can be a useful alternative where the obligations of a partnership are too onerous for your particular matter or where the parties are pursuing income tax advantages.
Providing valued insight and risk minimisation
Partnerships are less regulated than companies, however that does not mean that they do not bring with them important legally enforceable obligations. When two entities form a partnership, they how they will share the profits of the agreement. More concurringly though, the parties agree to be joint and severally liable. Joint and several liability means that each party is responsible for the actions and debts of the other party or parties, which means that creditors are legally entitled to pursue you in the event of the business becoming insolvent.
The risks associated with a partnership mean that you expert legal advice can oftentimes be the only way to establish a legally recognised partnership and protect the entities involved. Our Gold Coast business lawyers are specialists in the drafting and structuring of partnership agreements and can assist you in creating amicable terms between entities to a partnership.
Differentiating partnerships from joint ventures
The line between what is a joint venture and a partnership can be confusing to decipher. Oftentimes parties intend to only establish a joint venture but are found by the court to have been operating as a partnership.
The distinction between a partnership and joint venture is especially important depending on what the parties intend in terms of their liability to answer for the actions and debts of the other parties. An incorporated joint venture can also operate in a similar space to a partnership where the parties are particularly concerned about undertaking the risk of a complete partnership. Incorporated joint ventures can also be dictated by a shareholders agreement.
Often times the parties have equal vote in the operation of the venture so “deadlocks” are common. We can assist you in drafting deadlock clauses that prevent the venture from being wound up in the event of a disagreement.
Our areas of expertise include:
Partnership advice, Drafting partnership agreements, Advising on alternative arrangements, Drafting shareholders agreements, Drafting unitholders agreements, Risk minimisation strategies, Joint ventures.