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While it is often a misunderstood position, partnerships can in fact be formed in the absence of a formal agreement. Often referred to as a partnership at will, in the event of a dispute between partners and in the absence of a formal partnership agreement, a partnership may be dissolved at any time upon notice, notwithstanding the length of time the partners were in business together and the amount of goodwill and assets in the partnership.
Due to this uncertainty, it is highly recommended that partners enter into a formal partnership agreement in order to effectively govern their conduct within the business. Matters for consideration can include: duration, capital and current accounts, drawings, duties, the process for incoming and retiring partners, restrictions and dissolution.
At BakerLaw, we have experience in drafting and advising on partnership and LLP Agreements, being an LLP ourselves.