partnership agreement

= articles of partnership

An agreement made between the partners of a partnership. In the absence of either an express or an implied agreement the provisions of the Partnership Act (1890) apply. These provisions are also applicable if an agreement is silent on a particular point. The provisions are:

• partners share equally in the profits or losses of the partnership;

• partners are not entitled to receive salaries;

• partners are not entitled to interest on their capital;

• partners may receive interest at 5% per annum on any advances over and above their agreed capital;

• a new partner may not be introduced unless all the existing partners consent;

• a retiring partner is entitled to receive interest at 5% per annum on his or her share of the partnership assets retained in the partnership after his or her retirement;

• on dissolution of the partnership the assets of the firm must be used first to repay outside creditors, secondly to repay partners' advances, and thirdly to repay partners' capital. Any residue on dissolution should be distributed to the partners in the profit-sharing ratio.

See also: limited liability partnership