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Forming a Partnership Agreement

One of the common businesses in South Africa is a partnership. A partnership is a business entity where the partners share in the profit and liability of the business. A partnership agreement can be signed for this.

business partners

A partnership can be formed by two, or a combination of natural person and a legal entity (companies or closed corporations). To make the process easy, a partnership agreement can be signed.  Although it can be comprised of a legal entity, a partnership is never a separate legal entity. That means that the partners involved in the partnership will be held accountable for the doings of the partnership. A partnership must consist of at least two people and a maximum of twenty people.

A partnership is also not continuous. If one of the partners withdraw from the partnership or one of the partners pas away, the partnership will dissolve. When the partners sign a Partnership Agreement, nothing in the agreement can change. As soon as a new partner wants to join or terms of the agreement are to change, the partnership also dissolves. Then a new Partnership Agreement must be arranged.

There are two types of partnerships – ordinary and extraordinary. In an ordinary partnership, the partners are known to the public. They also contribute to the partnership by means of labour or other contributions. An extraordinary partnership is where the partners remain anonymous. The names of the partners are not disclosed to outside parties.

In some cases, partnerships are formed between two companies. This is done when a certain task must be completed by the two companies. This is also referred to as a joint venture

Things to be done to form a Partnership

Just like a sole ownership, a partnership is quite easy to start. All that is needed is the drafting of a Partnership Agreement. This is where all the detail and the terms of the agreement among the partners are stipulated. Then, all that is left to be done is to register the partnership with the South African Revenue Services. To simplify the process even more, you can contact Pty Company Registration . They will be happy to assist you, should you feel unsure about any part of the process.

Requirements to start a Partnership

There must be an agreement between the partners of the partnership. This is done by a Partnership Agreement. Here in all the partners will be mentioned and what they will contribute to the partnership. The division of the profit will also be stipulated in this agreement. There is no rule enforcing that the agreement must be in writing, so it can also be a verbal agreement.

The partners should also have the same goals for the business. This will ensure that the partnership moves in the right direction. Furthermore, the partners must contribute something of worth to the partnership. This can be capital, skills or expertise. This might have an influence on the division of profit.

The Partnership Agreement

Listed below are some of the things to consider to include when drawing up or discussing the Partnership Agreement:

  • The name of the partnership
  • The business that the partnership will be involved in
  • Roles and responsibilities of each partner
  • If they will be needed full-time
  • How the profit and losses will be shared among partners
  • Which of the partners will have cheque and purchasing rights
  • Other specifications that might be unique to your startup

Partnerships are ideal when you have an idea and people with different, compatible recourses. It is easy enough to start and offers a fair amount of freedom to the partners. With the right combination of partners, there is no reason why a partnership won’t take off.

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