Introduction to business partnerships

Introduction to business partnerships

Q1: What is a partnership?

A partnership is a description of a business arrangement where two or more people carry on a business together with a view to making a profit.

There are three main types of business partnership:

General partnership (or ordinary partnership)(see Q. 2). This is the most common type of partnership for running a commercial business, with minimal formality required to set up and very limited filing and governance obligations.

Limited liability partnership (see Q. 3). Also known as an LLP. This type of partnership is occasionally used by commercial businesses, but is much less common than general partnerships. An LLP must be registered at the CIPC, and the ongoing filing and governance obligations are similar to running a company.

Limited partnership (see Q. 4). Also known as an LP. This type of partnership is very rarely used by commercial businesses. Most LPs are used by investment businesses or funds.

For guidance on which type of partnership might be best suited to your business, see Q.. 5.

Q2: What is a general partnership or ordinary partnership?

The most common type of partnership is a general partnership or ordinary partnership, where two or more people carry on a business together with a view to making a profit. A general partnership is different from a limited liability partnership (LLP)and a limited partnership (LP) (see Q. 1).

There is no need for the partners to go through any formalities in order to create a general partnership, or to sign any kind of written agreement (although it is good practice to have a partnership agreement – see Q. 12). A general partnership can be established whenever two or more people agree to collaborate on a business. Conversely, an LLP or LP can only be set up by registering with the CIPC.

A general partnership is a flexible way of operating a jointly owned business, without the ongoing filing and governance obligations associated with companies, LLPs and LPs. However, a general partnership is not its own separate legal entity. This means the partners of a partnership will be personally liable for the bills and debts incurred by the partnership, potentially putting their personal assets at risk. The partners will also personally share (and be taxed on)any profits.

Q3: What is a limited liability partnership (LLP)?

A limited liability partnership (or LLP)is a specific type of partnership, different from a general partnership or limited partnership (see Q. 1). An LLP can only be set up by applying to the CIPC.

An LLP has its own separate legal identity, similar to a company. It can enter into its own contracts and can incur its own bills and debts. As the name suggests, the partners of a limited liability partnership have an agreed limit on their own personal liability, much like shareholders of a company. This is not the case for the partners of a general partnership.

LLPs are not widely used by commercial businesses and detailed guidance on setting up and running them is currently beyond the scope of the Sparqa Legal service. If you need specific guidance on setting up and running an LLP, you should obtain separate professional advice. For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service.

Q4: What is a limited partnership (LP)?

A limited partnership (or LP)is a specific type of partnership, different from a general partnership or limited liability partnership (see Q. 1). An LP can only be set up by applying to the CIPC.

An LP is effectively a partnership between at least one so-called general partner, who is responsible for managing and controlling the business, and one or more limited partners. The limited partner (s)have an agreed limit on their own personal liability. Conversely, the general partner is personally liable for the bills and debts incurred by the LP, potentially putting their personal assets at risk. This differs from a general partnership, where all partners are jointly responsible for the liabilities incurred by the partnership, and from an LLP, where all partners have an agreed limit to their personal liability.

LPs are very rarely used by commercial businesses and detailed guidance on setting up and running them is currently beyond the scope of the Sparqa Legal service. If you need specific guidance on setting up and running an LP, get individual professional advice. For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service.

Q5: Which type of partnership should I choose for my business?

General partnerships are most commonly used for commercial businesses, due to the minimal set-up costs, the flexibility, and the absence of any requirement to register and file information at the CIPC.

LLPs and LPs are less commonly used for commercial businesses. LLPs are often used by professional practices such as firms of accountants and solicitors, who want to operate as a partnership but wish to limit their personal financial liability. LPs are commonly used as investment vehicles, where the limited partners are simply passive investors who only advance cash to the business and do not have any control over the decision-making or management of the business. LLPs and LPs can also be used for tax efficiency, however detailed advice on tax is beyond the scope of the Sparqa Legal service.

Setting up and running an LLP will, in most cases, require you to obtain separate professional advice. Detailed guidance on setting up and running LLPs and LPs is currently beyond the scope of the Sparqa Legal service. If you need specific guidance on setting up and running an LLP or LP, for access to a specialist lawyer in a few simple steps you can use our Ask a Lawyer service.

Q6: Can I convert my business partnership into a company?

Yes, and often this may be desirable for partners who want to limit their potential financial liability if things go wrong – companies provide much more protection than partnerships. See Q. 28 and Q. 29.

If converting a business partnership into a company, you will need to ensure the partners are issued shares in the company to reflect their ownership of the partnership. Similarly, partners involved in the management of your partnership will also likely want to be appointed as directors of your company so they can continue exercising a similar amount of control over the business.

For more detailed Q. guidance on the steps you need to take to set up a new company, see Setting up a new company, and for all the documents you need together with a handy How-to guide, see our comprehensive Starting a company toolkit.

Starting a business partnership

Q7: How do I set up a partnership?

A general partnership is established as soon as two or more people start a business together with a view to making a profit. There is no requirement for a partnership to be registered or even to be given a name. For this reason, it is quite possible for a partnership to be established without the partners themselves even realising (see Q. 8).

Despite this absence of formal registration requirements, there are practical considerations you should always have in mind before starting a partnership business:

  • make sure that a general partnership is the right vehicle for running your business (see Q. 5);
  • consider getting a written partnership agreement to regulate the relationship between the partners and set out everyone’s rights and entitlements (see Q. 12). If you don’t have a partnership agreement, a range of default legal provisions will apply to your partnership (see Q. 15);
  • choose a name for your partnership (see Q. 9);
  • ensure you meet your legal obligations to include the names of your partners on your business stationery and at your registered office (see Q. 11);
  • choose a nominated partner and make the necessary registrations with SARS before the relevant deadlines;
  • find out whether you need to register the partnership for VAT (see Q. 18); and
  • obtain any necessary business licences (see Business licences).
  • There is no need to notify the CIPC when setting up a general partnership.

For a template partnership agreement you can adapt for use by your business, see Partnership agreement.

Conversely, the process for setting up an LLP or LP is more complex, and requires you to register at the CIPC. LLPs and LPs are not commonly used by commercial businesses and detailed guidance on setting up and running them is currently beyond the scope of the Sparqa Legal service. If you need specific guidance on setting up and running an LLP or LP, it is sensible to get specific professional advice. For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service.

Q8: Have I set up a business partnership by accident?

You can be involved in a partnership without ever having expressly decided that is the form you want for your business.

Any business arrangement where two or more people carry on a business together with a view to making a profit can be a general partnership, even if you do not give it a name or formally recognise it as such. For example, if you and a friend collaborate on a business idea without setting up a company or signing any paperwork, you may well have still set-up a partnership together. There are two important consequences of this:

If you have not agreed otherwise, a range of default provisions will regulate your business partnership arrangement. These will often have undesirable or unintended consequences for your business, covering things like how you share profits or losses and how you make decisions. For a full list, see Q. 15.

Not being aware that you have set-up a partnership business is no defence to failing to register it with SARS (see Q. 16), and/or failing to file partnership tax returns (see Q. 30). Both of these failures can lead to penalties from SARS.

For these reasons, it is vital that you can spot when a partnership might exist (see Q. 2), and take the necessary steps to properly set it up (see Q. 7)and put in place a partnership agreement (see Q. 12). For a template partnership agreement you can use for your business, see Partnership agreement.

Conversely, it is not possible to set up an LLP or LP by accident, as each must be registered at CIPC. As LLPs and LPs are not commonly used by commercial businesses, detailed guidance on setting up and running them is currently beyond the scope of the Sparqa Legal service. If you need specific guidance on setting up and running an LLP or LP, you should obtain separate professional advice. For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service.

Q9: How should I choose a name for my partnership?

Choosing a name for your general partnership is less restricted than choosing a name for your company, LLP or LP. However, when choosing your partnership’s name it must not:

suggest your business has a connection with government or public authority without permission;

  • contain a prohibited sensitive word;
  • include the words ‘limited’, ‘Ltd’, ‘limited liability partnership’ or ‘LLP’ (unless limited liability applies to your partnership), ‘public limited company’ or ‘plc’;
  • be offensive;
  • be misleading about what your activities do in a way that is likely to cause harm to the public;
  • infringe another person’s trade mark; or
  • be too similar to the trading name or brand of another business.

There is no need to register the name of your partnership at the CIPC.

If the name of your partnership is an important part of your brand, you should also consider registering your own trademark and domain name in order to protect your name. See Checking business names and domain names and Checking if a name breaches someone else’s rights for detailed guidance on how you can check your proposed name will not infringe another person’s intellectual property and how you can register a domain name.

For guidance on registering a trade mark to protect your proposed name, see Preparing to register a trade mark.

Detailed guidance on choosing a name for an LLP or LP is currently beyond the scope of the Sparqa Legal service. If you need specific guidance on choosing a name for an LLP or LP, you should obtain separate professional advice. For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service.

Q10: Do I need to register my partnership with the CIPC?

No. There is no need for you to register any details of a general or ordinary partnership with the CIPC. This differs from an LLP or LP, which must be registered at the CIPC (see Q. 3 and Q. 4).

You must still remember to register details of your general or ordinary partnership with SARS, however (see Q. 16).

Q11: Do I need to display the name of my partnership or partners anywhere?

Yes. You must include the name of your partnership and partners on all of your business documents and correspondence. You must also have a list of partners at the address set out in your documents and correspondence.

Partnership agreements

Q12: Do I need a written partnership agreement?

No, there is no requirement for a general partnership to have a written partnership agreement. However, in most cases, it will be in all partners’ interests to enter into a written partnership agreement. In the absence of a partnership agreement, a range of default provisions will regulate how your partnership is operated. These will often have undesirable or unintended consequences for your partnership business, particularly if a dispute or disagreement arises. For further guidance on these default provisions, see Q. 15.

The only way to avoid having these default provisions apply to your partnership is to have a separate agreement between the partners. For this reason, it is always important to consider entering into a written partnership agreement before you start doing business (see Q. 12).

For a template partnership agreement you can adapt for use by your business, see Partnership agreement.

There is no legal requirement for an LLP or LP to have a written partnership agreement either but different default rules apply to LLPs and LPs. As LLPs and LPs are not commonly used by commercial business, detailed guidance on setting up and running them is currently beyond the scope of the Sparqa Legal service. If you need specific guidance on setting up and running an LLP or LP, you should obtain separate professional advice. For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service ].

Q13: What should a partnership agreement contain?

Your partnership agreement should set out a range of ground rules to help your partnership run smoothly, and to help resolve any disputes or disagreements that might arise between the partners. There is no legal requirement for a partnership agreement to take a standard or specific form, or to contain any compulsory provisions. However, most partnership agreements will cover things like:

  • a name and description of the business to be carried on by the partnership;
  • partners’ duties and responsibilities;
  • how profits and losses are divided;
  • when and how partners can retire or be expelled, eg for bad behaviour; and
  • the obligations of the partners not to compete with the partnership for business.

All of the above matters are covered in our template Partnership agreement.

Q14: How do I enter into a partnership agreement?

A partnership agreement can be verbal or in writing. To avoid any dispute over the terms of your agreement, it is advisable to enter into a written partnership agreement. For guidance on what your partnership agreement should contain, see Q. 13.

The procedure for entering into a written partnership agreement will depend on the form and content of the agreement itself. In most cases, it should be a straightforward case of ensuring all partners sign the relevant legal agreement. Often, a partnership agreement will be a deed, which means it will need to be signed by each partner in the presence of a witness who confirms their signature.

Our template Partnership agreement is a deed, which should be signed by all partners in the presence of a witness.

Q15: What happens if I do not have a partnership agreement?

If you do not have a partnership agreement (either written or verbal), a range of default provisions will apply to your partnership. These broadly dictate that the partners will be jointly and equally responsible for controlling the partnership. Examples of these default rules include:

  • all partners having a right to share equally in the profits of the partnership;
  • all partners being equally responsible to contribute to the losses of the partnership;
  • all partners having a right to take part in management;
  • all decisions to be made by a majority vote of all partners;
  • no partner having any entitlement to remuneration;
  • no new partners to be appointed without consent of all existing partners;
  • no partner may be expelled from the partnership by the other partners;
  • unless the partnership is set up for a fixed purpose or period of time, each partner having the right to terminate the partnership by serving notice to the other partners; and
  • the partnership shall be terminated upon the bankruptcy or death of any partner.

As some or all of the above rules are likely to be undesirable, particularly in the event of a dispute or disagreement arising amongst the partners, it is advisable to consider entering into a partnership agreement.

For guidance on what your partnership agreement should contain, see Q. 13. For guidance on entering into a partnership agreement, see Q. 14.

For a template partnership agreement you can adapt for use by your business, see Partnership agreement.

Tax and business partnerships

Q16: Do I need to register my partnership with SARS?

Yes. Both the partners of a general partnership and the partnership itself must register with SARS. A partnership’s nominated partner is responsible for registering the partnership itself with SARS.

The partners and the partnership must register with SARS before 5 October in the partnership’s second tax year. For example, if you start a partnership business in the 2020-2021 tax year, you will need to register the partnership with SARS by 5 October 2021. Failing to register can lead to a fine or other penalties.

Q17: How do I register my partnership with SARS?

A partner or partnership can register with SARS either:

  • online by using the CIPC.co.za website; or
  • by completing and submitting form SA400 (to register a partnership)and/or form SA401 (to register as a partner of a partnership).

For more detailed guidance on your partnership’s tax affairs, you should obtain professional advice from an accountant or a tax adviser. Partnership tax advice is beyond the scope of the Sparqa Legal service.

Q18: Does my partnership need to register for VAT?

Potentially, yes.

In most cases, you must register with SARS for VAT and charge it on your goods or services if your turnover for the previous 12 months is more than R500,000, or if you believe your annual turnover will move past the R500,000 per annum threshold figure within the next 30 days. For further guidance on when and how to register for VAT, see VAT registration.

If you are in doubt about whether these requirements apply to your partnership, you should speak to an accountant or tax adviser. Partnership tax advice is beyond the scope of the Sparqa Legal service.

Running a business partnership

Q19: Who controls my partnership?

Your general partnership will be controlled jointly by the partners.

Precise allocations of responsibility can be set out in a partnership agreement (see Partnership agreement for a template you can use), and the partners have broad freedom to allocate power and control of the partnership business as they see fit.

In the absence of such a partnership agreement, however, default provisions dictate that the partners will be jointly and equally responsible for controlling the partnership. For further guidance, see Q. 15. These default provisions are likely to be undesirable and unsuitable for many partnerships, which is one of the key reasons why it is important to consider entering into a written partnership agreement before you start doing business (see Q. 12).

Different rules and default provisions apply to LLPs or LPs. Guidance on these is currently beyond the scope of the Sparqa Legal service and you should obtain separate professional advice. For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service.

Q20: How should my partnership make decisions?

The partners of a partnership are free to decide how decisions should be made, and how the business should be managed. The decision-making procedures are therefore far more flexible than those which apply to companies.

The way in which your partnership is managed and decisions are made should be set out in your partnership agreement. If you have a written partnership agreement, you should review it to identify how decisions are to be made. If you use our template Partnership agreement, you can choose how the partners’ votes are weighted when making decisions.

In the absence of any partnership agreement (either written or verbal), each partner has a right to participate in management of the business and all decisions should be reached by a majority of the partners.

Q21: Who can sign contracts for my partnership?

Any partner is able to sign contracts for and on behalf of your partnership. All partners will be bound by any document signed by a partner in the course of the partnership’s usual business, or signed by a partner in your partnership’s name. Therefore it is vital that you trust your partners completely.

Non-partners are also able to sign documents for and on behalf of your partnership, so long as you have provided them clear authority to do so and they sign in your partnership’s name.

If your partnership is executing a deed, it should be signed by a partner or another person in the presence of a witness. For further guidance, see Signing documents on behalf of a company.

Q22: How are the profits of my partnership divided?

The partners of a partnership are free to decide how the profits should be divided. The division of profits does not need to reflect the contribution each partner makes to the business, and need not be equal.

The way in which profits are shared between partners should be set out in your partnership agreement. If you have a written partnership agreement, you should review it to identify how profits are to be shared. In our template Partnership agreement, you can agree that profits will be shared equally between the partners, or set out the proportions in which the profits will be shared.

In the absence of any agreement (either written or verbal)on how profits should be shared, the default position is that they will be shared equally between the partners.

Q23: Do partners have the right to be paid a salary or receive any remuneration from my partnership?

There is no automatic right for partners to be paid a salary or receive any remuneration from your partnership. In the absence of any agreement (either written or verbal)on payment of salaries or remuneration, a partner shall not receive any such pay in return for their work for the partnership.

The partners can agree to provide salaries and/or remuneration to partners in a partnership agreement.

Regardless of whether the partnership has a written (or verbal)partnership agreement or not, partners may transfer their share of profits (see Q. 22)out of the partnership by making drawings from the partnership bank account (see Q. 24). To provide clarity to all partners, it is best to set out how drawings can be approved in a partnership agreement (see Q. 25).

Q24: What is a partner’s draw or drawing?

A partner’s draw or drawing is a reference to the partner taking cash or other assets out of a partnership, usually in anticipation of their share of profits or other assets applied to the partnership for their personal benefit. In the most simple cases, this can simply be done by transferring money from the partnership’s bank account to a partner’s personal account.

Q25: How is a partner’s draw or drawing approved?

The way in which drawings are approved, the amount that may be drawn, and the frequency with which they are made should be set out in your partnership agreement. If you have a written partnership agreement, you should review it to identify how drawings are to be approved and made. By using our template Partnership agreement, you are able to choose whether drawings can be made on a monthly or quarterly basis. Under the template partnership agreement, drawings made by a partner which are in excess of the annual profits they are entitled to must be repaid with interest.

Q26: What is a partner’s capital contribution?

A partner’s capital contribution is the amount of cash or other assets that the partner has invested or transferred to fund a partnership. A partnership’s accounts should keep track of the capital contributed by each partner.

If there is any requirement for a partner to make a minimum or fixed capital contribution, this would be set out in your partnership agreement. Note that our template partnership agreement does not include such a requirement, to provide you maximum flexibility when appointing any new partner. For further guidance see Q. 27.

Q27: Are all partners required to make a minimum capital contribution to my partnership?

Any requirement for a partner to make a capital contribution (see Q. 26)would be set out in your partnership agreement. Note that our template partnership agreement does not include this requirement, to provide you maximum flexibility when appointing any new partner. Sometimes, a partner may be required to contribute a minimum amount before joining the partnership. If you have a written partnership agreement, you should review it to identify any capital contribution requirements.

Even in the absence of provisions requiring a partner to make a capital contribution, as the partners of a partnership are personally liable for the debts and losses of a partnership, all partners may still be legally responsible to contribute towards any debts or losses of the partnership. For further guidance, see Q. 28.

Q28: Can I be personally liable for the debts or losses of my partnership?

Yes. The partners of a partnership are jointly responsible for its debts or losses. This means that if a partnership owes a lender R50,000, each partner is potentially personally liable to the lender for the full R50,000 debt.

If they wish to, the partners are free to agree more specifically how debts and losses should be shared between them internally, and what portion of losses each partner is responsible for. However, if a third party wants to make a claim against your partnership, the nature of joint liability means they are able to bring a claim against any or all of your partners for the full amount they are seeking (see Q. 29).

Any obligation on partners to contribute towards debts or losses should be set out in your partnership agreement. If you have a written partnership agreement, you should review it to identify how losses are to be dealt with. If you use our template Partnership agreement, you can agree that profits and losses are shared equally or in certain proportions. However, all partners will still be jointly liable to third parties for losses.

In the absence of any agreement (either written or verbal)on how debts or losses should be shared, the default position is that the partners must contribute equally towards the losses incurred by the partnership.

Q29: What happens if someone wants to sue my partnership?

If your partnership business causes someone else loss or injury, and they want to bring a claim against your partnership, the partners will be personally liable for defending the claim.

Partners of a general partnership have so-called joint and several liability for any wrongs caused by your partnership. This means that a person seeking to bring a claim against the partnership can either sue all partners jointly, sue all partners separately, or sue an individual partner to recover the damages they are owed.

Your partnership agreement may contain an indemnity to protect you from personal liability. You may also seek business insurance. However this isn’t guaranteed to cover or protect you, particularly the indemnity, if you end up insolvent.

The way in which claims against your partnership (or a partner)are handled should be set out in your partnership agreement. If you have a written partnership agreement, you should review it to identify what should happen if someone brings a claim against your business.

Q30: Does my partnership have to file a tax return?

Yes, your partnership needs to file a tax return each year. This is in addition to each partner filing their own tax return.

Q31: How does my partnership file a tax return?

Your partnership tax return should be filed by 31 October each year if you file a paper tax return, or by 31 January each year if you file your return online. For example, for the 2020/21 tax year, your partnership should file its tax return by 31 October 2021 if filing a paper return, or by 31 January 2022 if filing an online return.

If your partnership fails to file its tax return by the relevant deadline, each partner will be charged a penalty. This penalty will increase if the delay continues.

Before filing your partnership’s first tax return, you should register with SARS. For guidance on how to do this, see Q. 16.

If you have any queries or are unsure how to go about filing your partnership’s tax return, you should obtain professional advice from an accountant or a tax adviser. Partnership tax advice is beyond the scope of the Sparqa Legal service.

Appointments, resignations and expulsions from a business partnership

Q32: Can my partnership appoint a new partner?

Yes. The way new appointments are approved depends on whether you have a written partnership agreement or not (see Q. 33 for further guidance).

Q33: How can my partnership appoint a new partner?

If the partnership has a written agreement, the necessary procedure or approval threshold required should be set out in it. If you have a written partnership agreement, you should review it to identify how new partners are to be appointed. In most cases, it will be vital to ensure that any new partner signs up to your partnership agreement when they are appointed. If your partnership agreement is a deed, this is achieved by having the new partner sign a so-called deed of adherence.

If you use our template Partnership agreement, anyone can be brought in as a new Partner by the unanimous agreement of the existing Partners, provided they sign a deed of adherence agreeing to be bound by the terms of the partnership agreement.

In the absence of any agreement (either written or verbal), a new partner can only be appointed if all existing partners approve their appointment.

Q34: Can my partnership remove or expel a partner?

Maybe. You can only remove or expel a partner if the partners have expressly agreed that such a power to remove or expel a partner should exist. In the absence of a written partnership agreement, or clear evidence of an oral agreement to allow partners to expel one another, a partner cannot be expelled or forcibly removed.

Q35: How can my partnership remove or expel a partner?

You can only remove or expel a partner if the partners have expressly agreed in writing or in a clear oral agreement that such a power to remove or expel a partner should exist. Otherwise, there is no default right to forcibly remove or expel a partner.

In most cases, the right or power to expel a partner will be set out in your partnership agreement. You should review your partnership agreement to identify the procedure you need to follow to remove or expel a partner.

Our template Partnership agreement sets out the circumstances in which a partner can be expelled by written notice:

  • if they have fundamentally broken the agreement in a way that cannot be corrected (or, if the breach can be corrected, they have failed to do so in a reasonable time);
  • a bankruptcy order is made against them;
  • they have allowed their share of the partnership, or partnership property, to be used for separate debt; or
  • their actions or failure to act has had a significant adverse effect on the partnership.

Q36: Can a partner retire from or leave my partnership?

Yes. If your partnership does not have a written or verbal agreement in place, any partner may resign by providing notice to the other partners. However, this resignation will automatically cause the partnership business to be wound up.

This means it is nearly always best to enter into a written partnership agreement setting out a procedure for resignation and a right for the remaining partners to continue the business. You can use our template Partnership agreement which contains such terms.

Q37: How can a partner retire or leave my partnership?

The necessary procedure for a departing partner to follow, including any notice requirement, should be set out in your partnership agreement. If you have a written partnership agreement, you should review it to identify how partners may retire or leave. In our template Partnership agreement, the partners can choose the number of months’ notice a partner must give of their retirement, and can choose how many months a partner must have been unable to perform their duties (continuously and/or intermittently)before the other partners may give them notice of retirement.

In the absence of any agreement (either written or verbal), any partner is free to resign by providing notice to the other partners. However, as set out in Q. 36, the resignation of a partner will automatically cause the partnership business to be wound up. For this reason, it is nearly always beneficial to enter into a written partnership agreement setting out a procedure for resignation and a right for the remaining partners to continue the business.

Ending a business partnership

Q38: Can I end a business partnership?

Yes. If your partnership does not have a written or verbal agreement in place, a partnership can end either by the expiry of a fixed period of time, by completion of the purpose for which it was set up, or by any partner serving notice (see Q. 36).

If you have a written or verbal partnership agreement (which is recommended), the necessary procedure to follow (or events that trigger a winding up of the business)should be set out in it.

Q39: How can I end a business partnership?

The necessary procedure to follow, or the events that will trigger a winding up of the business, should be set out in your partnership agreement. If you have a written partnership agreement, you should review it to identify how your business partnership should be wound up. In our template Partnership agreement, the partnership can be wound up by unanimous consent of all the partners.

In the absence of any agreement (either written or verbal), a partnership can end either by the expiry of a fixed period of time, by completion of the purpose for which it was set up, or by any partner serving notice (see Q. 36).

Q40: What happens to the cash, assets and debts of my business partnership when it is wound up?

The way in which the cash, assets and debts of your partnership are shared when it is wound up will usually be set out in your partnership agreement. If you have a written partnership agreement, you should review it to identify how your business partnership should be wound up.

In the absence of any agreement (either written or verbal), default rules under partnerships legislation apply. This means if there is not sufficient cash and assets to settle the debts and losses of a partnership when it is wound up, all partners will be personally liable for such debts in equal proportions. If any surplus cash and assets remain after such debts and liabilities have been settled, this will be shared evenly amongst the partners. Our template Partnership agreement also follows these default rules.