The Partnership Act Does Not Require That the Agreement Must Be in Writing
When starting a business partnership, many people believe that they need to have a written agreement in place to fully protect themselves and their interests. However, this is not always the case. In fact, the Partnership Act does not require that the agreement must be in writing.
According to the Partnership Act, a partnership is defined as « the relation which subsists between persons carrying on a business in common with a view of profit. » This means that two or more people can come together to run a business and, as long as they intend to make a profit and work towards that goal together, they are considered to be in a partnership.
While it is always advisable to have a written partnership agreement, this is not legally required. However, there are several reasons why it is a good idea to have a written partnership agreement in place.
Firstly, a written partnership agreement can help to avoid misunderstandings. When two or more people are running a business together, there may be disagreements or different opinions on how certain aspects of the business should be run. A written agreement can help to set out the expectations of each partner and provide clarity on how decisions will be made.
Secondly, a written partnership agreement can help to protect the partners` individual interests. For example, it can outline how profits will be divided between partners, what happens if a partner wants to leave the partnership, and how disputes will be resolved.
Finally, a written partnership agreement can help to provide evidence of the partnership`s existence if there are ever any legal disputes. While a partnership can exist without a written agreement, having one can make it easier to prove the existence of the partnership and the terms on which it was formed.
In conclusion, while the Partnership Act does not require that a partnership agreement must be in writing, it is always advisable to have one in place. A written partnership agreement can help to avoid misunderstandings, protect the interests of the partners, and provide evidence of the partnership`s existence. As such, it is well worth considering when starting a business partnership.