Without a partnership agreement, your partnership will be governed by the dated Partnership Act 1890. This Act permits a partner to retire with immediate effect without notice and this causes the partnership to automatically dissolve.
With a partnership agreement in place, there will be more certainty between the partners. A notice period can be inserted to ensure that the other partner is not left ‘in the lurch’ if one partner wants to retire. The agreement will include provisions about how one party may buy out the other’s share of the partnership and can also include a provision to pay off the outgoing partner in instalments. This can prevent disputes and unnecessary costs in the future.
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