Forming a partnership is a popular starting a company in the UK. Partnerships offer a number of benefits but if you are planning this type of company formation, you need to know how to protect your assets in the event that your partnership fails. You should have a clear plan in place to protect yourself and your property before you begin the partnership. This helps both partners to have an idea of what will happen should the business go under.
There are many reasons why a partnership may fail. Plans may change or the realities of running a business may be more than one or both partners had planned. Whatever reason causes the partnership to fail, you want to know that certain assets are protected if and when it does fail. Even in the closest of personal and professional relationships, you always need to plan for the unexpected.
When one partner wants to pull out of the business, it poses risks to the other partners as well as to the business as a whole. If you have not detailed who owns what part of the business, including all equipment and other assets, then you could be in for a messy dispute while these details are being ironed out. It is a much better idea to detail going into the business which partner has ownership of which specific asset. Not doing so could see one partner leaving and taking assets that are vital to running the business, which would leave other partners a bit shortchanged.
It makes good business sense to have an idea of what will happen should the partnership end. Having an agreement in place when you first form your company will help to reduce the change of a dispute arising should that partnership end. You can draft such a document before you enter into the partnership that will lay out the terms of your partnership during the running of your business and in the event that the partnership ends. Include in the document how the profits will be shared between your partners, the responsibilities of each partner and what will happen should one partner decide to leave the business. This will eliminate any assumptions related to your company assets from the beginning and seriously diminish any issues that you may face if and when your partnership ends.
If you have already begun trading as a partnership, you can still draw up this agreement. It is recommended that each partner obtain legal advice with regards to these issues. You can draft a document and file it with your official company documents and the document should give full details of the agreement as it pertains to every aspect of your partnership. You should avoid informal agreements, including agreements that you make verbally. All details of your partnership should always be documented so that you can use these documents if and when you need them. You enter into a partnership assuming that it will last. Unfortunately, this is not always the case and protecting yourself and your assets is vital whenever you share your company with someone else.