Main operational issues for a partnership to consider

What are the main operational issues to be considered in a Partnership Agreement?


The main operational issues to be considered are:

Degree of commitment:

It is important to consider how much work each partner is to do in the business. For example, a 'sleeping partner' whose involvement is purely financial, will not want to be required to take part in the daily running of the business. Also, some partners may want to work part time whilst others are to work full time. The Partnership Act 1890 will imply that each partner has the right to take part in the daily management of the business unless stated to the contrary. An agreement should set out the degree of commitment of each partner. For a full time working partner this may be expressed as devoting his/her whole time and attention to the business.

Sickness, absence and holidays:

When considering the degree of commitment that the partners are to have, you should address the issue of absence from the business. It is important to consider what will happen, for example, when a partner needs maternity leave or is suffering from long-term incapacity. You will have to qualify the duty of any full time partner to devote all his/her time and attention to the business with whatever is decided on about time off for holidays, sickness or other absenteeism.

Roles:

It is important to state the different functions each partner is to have within the firm and the extent of their authority. For example, one partner may be in charge of sales whilst another is in charge of purchasing. The agreement might state that a particular partner only has a set amount of authority, for example, to enter into contracts less than £10,000 in value, or alternatively, that a partner has authority to do whatever they feel is in the best interests of the business within their area. Any partner ignoring a restriction or the scope of their role may be liable for breach of contract.

Decision-making:

Unless otherwise agreed, all partnership decisions will be made on a majority basis by one partner one vote. However, if it is a decision on changing the nature of the business or the introduction of a new partner, then every partner must agree. It may well be, therefore, that this is not what partners in a particular business want. For example, it may be a good idea to state that certain decisions can be made by one partner alone, such as buying stock, other decisions require a majority vote, such as employing staff, whilst others require the consent of all the partners, such as buying new premises.

If the partnership is likely to prove quite complicated or there are substantial amounts of money or assets involved, you should seek advice from a solicitor. The above information however will help you consider the most important issues.
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