Reading time: 3 minutes

Ordinarily, a Partnership is structured in such a way that the partners will make equal contributions, or ‘investments’ into the Partnership. Some Partnerships, however, are structured differently and different partners make unequal contributions. In these circumstances, it is important that an experience business lawyer includes the details relating to ‘financial matters’ into the Partnership Agreement so that there is no confusion.

            Provision example 1: Unless otherwise agreed by the Parties, the Parties will contribute equally to the partnership capital at the commencement of the partnership and from time to time during the existence of the partnership.

The above provision is essential for any Partnership Agreement, especially those in which the partners make unequal contributions. If one partner has made a larger initial investment, it is reasonable to assume that he or she expects this difference to be accounted for in the Partnership Agreement.

 

            Provision example 2: Unless otherwise agreed by the Parties, the Parties will share equally the profits and losses of the partnership.

Understandably, partners who have made larger contributions to the Partnership will expect to receive a larger portion of the profits. This inevitably means that they also take on more risk of loss in proportion to their respective contribution. Speak with a business lawyer about drafting this provision into the ‘financial matters’ clause.

  

          Provision example 3: The Parties agree that they will keep and maintain proper books and accounts relating to the partnership, including but not limited to a schedule of all income and expenses of all income and expenses of the partnership.

This provision ensures that all receipts, payments, outgoings and ingoings are recorded in the Partnership accounts. This is an important term for your business lawyer to include in the Partnership Agreement as it guarantees that in the event of a dispute there is no question as to who has paid what.

 

           Provision example 4: The Parties agree that on [date] during each year of the partnership the Parties will cause to be prepared financial accounts, including but not limited to a balance sheet and profit and loss statement, for the partnership.

It helps to draft into the Agreement a requirement that the accounts will, once a year (at least), be prepared so that each partner is able to see the profits and losses of the Partnership, and raise any concerns that they may have about the future of the Partnership. Again, get your business lawyer to draft this into the Agreement.

 

           Provision example 5: Unless otherwise agreed by the Parties, these financial accounts must be prepared and a copy provided to each party within 3 months of the end of the financial year in each year of the partnership.

By providing a copy to each partner of the financial accounts, it is guaranteed that there will be no doubts as to the way in which the money of the Partnership is being used. This can sometimes be an area of concern for certain partners if there is not complete transparency.

 

            Provision example 6: The Parties will review the financial accounts and must give notice of any errors in the financial accounts within one month.

This provision places the responsibility on each partner to be checking that the accounts are in order. Your business lawyer would be wise to include this provision as well.

Conclusion

‘Financial matters’ should be as transparent as possible in any business, particularly a partnership. This maintains the integrity of the Partnership and strengthens the trust relationship between the partners themselves.

If you are in need of assistance drafting your Partnership Agreement, contact LegalVision on 1300 544 755 and speak with one of our experienced business lawyers.

Webinars

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Online
Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

Online
If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Online
Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

Online
If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Online
Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Online
Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer