An accountant at a small firm was offered the opportunity to join the partnership that owned the practice. 

The governing document of a partnership is generally a partnership agreement, which is required under the Partnerships Act.

Unlike companies, partnerships are not separate legal entities, so the partners are all contracting personally when they sign documents on behalf of the partnership.  This means that partners are jointly and individually liable for the actions of the partnership.  Partnerships have been a recognised business structure for over 100 years.

When buying into a partnership, a new partner would generally acquire ‘interests’ in the partnership as there are no ‘shares’ in partnerships.  Those interests would generally create their voting rights proportionate to a partner’s interest in the partnership.

The addition of a new partner can be recorded either in:

  1. A variation to the partnership agreement;
  2. A deed of accession or deed of covenant whereby the new partner agrees to be bound by the terms of the existing partnership agreement; or
  3. By entering into a new partnership agreement altogether.

Voting rights can differ between different types of partners (for example equity partners versus salaried partners) so it pays to have an experienced commercial lawyer review any partnership agreement before you sign it.

Because of the personal liability created by partnerships it pays to consider moving your family home into a trust prior to entering a partnership.  Some accountancy and other firms require a trust to be set up for this or other purposes as part of the process.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.