If you enter in to business with another person, whether it is intended as a long term partnership or not, and without a partnership deed, it will still be considered to be a partnership in law.
If the partnership is not formalised as a LLP then there is potential for a lot to be at stake due to an unlimited personal liability.
You may not know but you can transfer your partnership into an LLP or a company which may be advantageous as this will limit liability. This can be challenging if you have existing debts as your creditors may not be willing to agree as this will provide the creditor with less security if your liability is limited.
If you have a dispute but no partnership deed then this can be problematic as it is not possible to remove a partner who is problematic and it may result in the partnership being dissolved. This is not something that is necessarily desirable as it will result in the loss of an otherwise viable business and having to settle the partnerships debts which could cause more disputes as joint debts, which are joint and several liability, means that your creditor doesn't not have to chase both of you for the debt but can choose to go after just one of you.
It is therefore advisable for there to be a partnership agreement, if there is not one already, in order to prevent or at least limit the impact of any potential dispute.
Where there is a partnership agreement in place then any dispute will result from the interpretation of a grey area not specifically dealt with in the partnership agreement or a clear breach. In the first instance it is important to try and resolve the dispute in a sensible way.
We are able to offer advice and prepare partnership agreements as well as provide you with guidance and assistance in resolving partnership disputes.
For more information then do not hesitate to contact a member of our team.
