A partnership at will is a partnership where there is no fixed term agreed for the duration of the business. Unless there is any indication to prove otherwise, a partnership of this sort can begin and dissolve relatively informally.

Without any formal agreement the partnership is subject to the terms of the Partnership Act 1890 by default in the eyes of the law.

The 1890 Act is often unsuited to modern businesses as they are automatically dissolved when a partner dies, and it is impossible for a partner to retire without the same outcome.

The difficulties of a partnership at will

Unless there is agreement to the contrary, a partnership at will also calls for equal division of all of the business’ profits and losses in income and capital. This means that all partners are liable for any debts incurred by the business which could result in repaying creditors out of personal assets.

It can take very little for a partnership at will to be dissolved, for example any partner has a right to serve a notice to dissolve the partnership at any time.

The benefits of a formal agreement

Having a formal arrangement such as a partnership deed or agreement protects against unwanted legal difficulties when a partner leaves the business.

partnership agreement can outline a provisional protection in the instance that the worst should happen and a partner is bankrupted or dies, leaving problems behind for the remaining partner/s. If this happens without precautions in place, the other partners are liable for all costs owed.

An agreement is particularly crucial in a medical partnership. The lack of an agreement or deed in this scenario could result in the redundancy of staff and loss of existing NHS contract for services.

In a medical partnership a new agreement must be in place and signed by all involved before the first day of any incoming partner. Failure to do so will result in a partnership at will which does not provide the maximum level of protection.

Ralli Solicitors are highly experienced in creating bespoke agreements and deeds to suit all manner of businesses and organisations. Partnership law solicitors can provide expert advice to give your partnership the best security for everyone concerned.

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