A partnership is a relationship between two or more persons who have agreed to carry on business in common and share profits.

You can become a partner either by contributing capital, which may be fixed when you decide to let your house or building be used as the office space, or by contributing Cash for the day-to-day running of the business.

As a partner, your only contribution may even be your skill or expertise.

In any case, once you are a partner you are entitled to share in the profits of the business based on the agreed sharing formula.

If you do not participate in profit sharing then you are probably not a partner.

There cannot be a partnership unless there is an Agreement to that effect.

The agreement can be oral or written it may even be by conduct the moment you are in a perceived partnership business an Agreement becomes necessary and it is best to document it.

There is no automatic Partnership, there must be some sort of understanding between you and the person(s) you are in business with and this understanding must be properly set out from the start and be documented to be enforceable although it's possible to also enforce an oral agreement.

This is because the mere fact that you have contributed cash or other assets to the company does not make you an automatic partner in the business.

An investor is not necessarily a partner although in practice with respect to small businesses, most investors want to be partners.

So how do you become a partner?

1 The existing partners must mutually agree to admit new members.

2. You must satisfy the terms for becoming a partner in the business.

3. The terms for admitting new members must be clearly set out in the Partnership Agreement.

Where there is no clause in the Agreement as to whether new partners can be admitted, the partnership agreement must be altered to enable the partners to admit new partners subject to terms to be agreed upon.

If it’s a fresh business. The intending partners must prepare a partnership agreement with clear terms containing their duties, rights and liabilities as partners.

The Partnership Agreement represents the entire understanding between or among the partners and it can be reviewed or altered to suit the specific needs of the business at each point in time.

Please note that This post relates mainly to general partnership although the principles can be applied in any other kind of partnership or collaboration in business.

With respect to the partnership that exists under a Limited Liability Company (LLC), a more robust requirements are needed to fully protect the interest of the partners (shareholders).

To your #LegalSense

#BarinaadaLegal.

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