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Partnership and LLP agreements
Partnership agreement solicitors in Scotland
Going into business with a friend, family member or colleague is exciting. A written partnership agreement protects that relationship by setting out everyone’s rights and responsibilities before anything goes wrong.
Protect the partnership before anything goes wrong
Without an agreement, the Partnership Act 1890 decides. These are the terms partners most often need.
What a partnership agreement does
A partnership agreement is a legally binding contract between the partners. It governs how the firm is run and sets out the relationship, duties and obligations of each partner. It can say how the business continues if a partner leaves, and who has authority to make which decisions.
Our solicitors work with you to understand the aims of the business and draft an agreement customised to it. Some businesses never put a formal agreement in place, but having one can protect your future if something unexpected happens.
What happens without a written agreement
If there is no written agreement, the Partnership Act 1890 fills the gaps. Its default rules are rarely what partners would choose. They include:
- Equal sharesPartners share capital and profits equally, whatever each has put in.
- Authority to bind the firmEvery partner can act for the firm and bind it in the ordinary course of business.
- Dissolution on noticeWhere no fixed term has been agreed, any partner can end the partnership by giving notice to the others.
- Death or bankruptcyThe death or bankruptcy of a partner can bring the partnership to an end unless the partners have agreed otherwise.
- Unanimous consentNo new partner can join, and the nature of the business cannot change, without every partner agreeing.
What we usually include
Every agreement is tailored, but these areas are frequently covered:
- Capital contributions and loans
- Profit shares and drawings
- How losses and debts are shared
- Roles and decision making
- Partnership property and assets
- Holidays, absence and incapacity
- Retirement and expulsion
- Valuing an outgoing partner’s share
- Restrictive covenants
- Resolving disputes
- Bringing in new partners
- Ending the partnership or selling the business
Avoiding a partnership dispute
Disagreements between partners can become complicated and contentious, particularly when one partner feels another is not pulling their weight or is taking more than their fair share. A clear agreement makes it far more likely that problems can be solved by following its terms rather than going to court.
If a dispute has already started, our partnership disputes team can advise on your options, including negotiation, mediation and, if needed, court action.
At a glance
- Without one
- The default rules in the Partnership Act 1890 apply
- Scots law
- A Scottish partnership is a separate legal person from its partners
- Liability
- Partners are jointly and severally liable for the firm’s debts
- Also for
- Limited partnerships and LLP members’ agreements
Going into partnership, or reviewing an old agreement? We will explain the choices and draft terms that fit your firm.
Book a free* consultation0141 471 9166*Free initial consultation of up to 30 minutes.How we prepare your agreement
- Initial consultationWe discuss how the partnership works now and how you want it to work.
- Key decisionsWe highlight the choices you need to make together, such as profit shares and exit terms.
- DraftingWe prepare the agreement in clear language and explain how each clause works.
- Signing and reviewWe arrange signing and can update the agreement when partners join or leave.
Questions we are often asked
Is a partnership agreement a legal requirement?
No, but without one the Partnership Act 1890 applies, and its default rules may not suit your business.
Can a partnership agreement limit my liability for the firm’s debts?
Not as far as creditors are concerned. Partners remain personally liable to third parties. The agreement can set out how losses are shared between the partners, and an LLP or limited company may be worth considering if limited liability matters to you.
What happens when a partner wants to leave?
Your agreement can set the notice period, how their share is valued and paid out, and whether the business continues. Without it, a partner leaving may bring the whole partnership to an end.
Can you help with an LLP agreement?
Yes. We prepare members’ agreements for LLPs, which do a similar job to a partnership agreement.
We already have an agreement. Should we review it?
If it is more than a few years old, or partners have changed, a review is sensible. Out-of-date agreements are a common cause of disputes.
Your legal team
Senior solicitors on every matter
Your matter is handled by experienced solicitors who know Scots business law and will explain your options in plain English.
Billy Smith
Director and Solicitor. Set up the firm in 2010 to deliver legal services better.
Emma King
Director and Solicitor. Joined in 2011 and keeps the firm’s service excellent.
Scott Stevenson
Associate Director. Calm, composed and logical under pressure.
Ciara Young
Associate Director. Trained with the firm from 2019.
Not sure who you need?
Tell us about your matter and we will put you in touch with the right solicitor.