Partnerships are unique in that whilst they can be relatively inexpensive to set up, a partner is exposed to being sued individually and is jointly and severally liable with the other partners.
It is not a separate legal entity in its own right and does not afford the protection of a corporate entity.
In simple terms a partnership is an association of two or more persons who wish to carry on a business for profit.
Each state in Australia has its own Partnership Act which outlines the mutual rights and duties of partners.
These Acts in each state are generally very similar and the definition of a partnership does not vary across jurisdictions, with each having the same criteria as to what a partnership is.
The main elements of a partnership are:
- An agreement;
- Between two or more persons and generally no more than twenty;
- To carry on a business;
- To share profits.
Generally, you will see three forms of partnership in Australia. They are:
- A general partnership – is where all the partners are responsible for running the business, sharing in the profits and have unlimited liability.
- A limited partnership – is where the partnership itself is made up of general partners who limit their liability to any money contributed and they don’t play a role in the day-to-day management of the business.
- An incorporated limited partnership – is where partners can limit their liability for debts to the business with one being a general partners who will have to have unlimited liability.
What happens if there is a partnership dispute?
It is important to ensure in any partnership there is a written partnership agreement which among a range of matters will outline how any disputes are to be dealt with.
It should also deal with from a practical perspective how the partners deal with any dissolution or where one partner wants to leave the partnership.
I always advise clients it is far more effective and productive to resolve disputes without resorting to the courts.
There are numerous ways to resolve any dispute and partnerships are no different.
Firstly, identify what the problem is. I often see when I sit down with partners who are in a dispute that their understanding and comprehension of what they are in dispute or arguing about is often blurred by misinformation and inaccurate understanding of each partners positions.
Often it is worth reducing their concerns to writing so it is properly enunciated.
It is important to keep an open mind and for the parties to communicate so a resolution to any dispute or deadlock can be resolved quickly and cost effectively.
If this fails, then you should consider mediation, preferably with an experienced mediation practitioner.
An experienced mediator will listen, be impartial and respectful to the parties. It is their job to try and facilitate a resolution that both parties can live with and move forward with.
Whilst it is always in everyone’s best interest to try and resolve a dispute for the benefit of the business sometimes it might be more productive to dissolve the partnership.
As indicated litigation should always be a last resort but sometimes it cannot be avoided.
How can FC Lawyers help with your dispute?
At FC Lawyers or business and commercial team have years of experience assisting clients to resolve disputes and work with them.
Contact our team today to discuss your legal options and find out how we can assist you through your partnership dispute.
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