A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits. To expand your business, you might have to consider partnering with other businesses to achieve your goals. In doing so, it is important to establish clear legal requirements for your partnerships.
The partnership agreement is a written agreement between two or more individuals who intend to form and carry on a business for the purpose of making a profit. This legal document is important for running a new partnership business; this serves as a form of protection for the parties involved. It states the nature of the business, the monetary contribution of each partner, the responsibility and rights of each partner.
Partnership is guided by the Companies and Allied Matters Act, according to the Act, the maximum number of Partners a Partnership can have is 20 (twenty), except law firms and accounting firms.
Also read: All you need to know about partnerships
The partnership agreement is also known as the Partnership deed, it should contain the following;
Name of the Partnership
The partnership deed should carry the name of the partnership; usually a partnership is registered as a business name by the Corporate Affairs Commission. As such, the name on the deed must be stated as contained in the certificate of registration
Place of Business
This is the principal place of business of the Partnership.
Purpose of Business
This is the business the Partners will carry out in the Partnership.
This part of the partnership contains the initial contribution the partners are prepared to make. This contribution can be monetary, property or services. The amount that each partner is willing to contribute should be specified, where the contribution is not monetary: state the type of contribution and the cash value of such contribution.
Profit and Loss Distribution
This shows how profits and losses will be distributed between the Partners.
Ownership Interest of the Partners
This states the percentage of the Partnership owned by each Partner.
Management and Voting Requirements
This describes how decisions will be made, how the Partnership will be managed, the type of votes that is required for admitting and removal of a Partner, making financial decisions, etc.
Dissolution of the Partnership
This explains the circumstances in which the Partnership can be dissolved and how the remaining assets will be divided between the Partners.
Once the document is completed, all the partners must sign the document, all the partners must provide a witness to the document, all the partners must have different witnesses. The witness must be at least 18 years old, must hand fill the necessary information and sign the document. After the document has been duly signed, each Partner must keep at least one copy each for record purposes.