Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
Contents
Starting a business with a partner can be an incredibly exciting next step-after all, teamwork can mean quicker growth, shared expertise, and a lot more fun than going it alone. But before you shake hands on your new venture, it’s essential to put the right legal foundations in place. Chief among them? A written deed of partnership.
Without a clear partnership agreement, you’re risking more than just misunderstandings-you could be exposing yourself to conflict, financial loss, or even legal claims down the track. Don’t worry, though: with the right planning, you can lock in each partner’s rights, responsibilities and a sensible exit strategy, helping your business operate smoothly if things ever change.
In this guide, we’ll walk you through why a deed of partnership is a must-have for your business, what needs to be included, and the difference expert legal help makes. Whether you’re starting a consulting practice, a creative studio, or a professional services firm, understanding the ins and outs of partnership agreements will set you up for long-term success.
Keep reading to ensure your partnership-and personal interests-are protected right from day one.
What Is a Deed of Partnership and Why Does It Matter?
A deed of partnership (also called a partnership agreement) is a formal, written contract between two or more partners who agree to do business together. It outlines the rules that will govern your business relationship-including how profits are shared, who calls the shots, and what happens if someone wants to leave. You don’t legally have to have one-unlike registering a limited company-but we can’t stress this enough: without a deed, your partnership is governed by default rules under the Partnership Act 1890. And those rules are… basic, to say the least.- No protection for your individual contributions or investments
- No custom arrangements for profits, losses or decision-making
- No clear paths for bringing a new partner in-or a swift exit if things go wrong
What Does a Deed of Partnership Typically Cover?
A strong partnership agreement isn’t just about profits. It should lay out all the practical and legal details of running your business, minimising the scope for future disagreements or surprises. Here are some of the key sections you’ll want to cover:- Capital Contributions: Who’s investing what? Will partners make cash investments, contribute assets, or bring in clients? Define every partner’s “buy-in” and any ongoing obligations.
- Profit and Loss Sharing: How are profits distributed? Is it split evenly, or based on who contributed more money or time? What about losses?
- Decision-Making and Authority: Who makes key decisions? Will some matters require a unanimous vote? Are any partners “nominated partners” with extra responsibilities (such as compliance or bookkeeping)?
- Roles and Responsibilities: What’s expected of each partner on a day-to-day basis? Are some partners ‘silent’ investors, or is everyone involved in management?
- Partner Remuneration: In addition to their profit share, will partners get a regular salary, expense reimbursement or bonuses?
- Admitting New Partners: What steps must be taken for someone new to join? Is there a required vote? Do they have a probation period?
- Exiting the Partnership: How can a partner leave? What notice do they need to give? How is their share valued? What happens if a partner dies or becomes incapacitated?
- Restrictions and Non-Compete Clauses: Can a departing partner run a rival business, work for competitors, or use trade secrets?
- Dispute Resolution: What process will you use if a disagreement arises-a formal mediation or arbitration?
- Winding Up and Dissolution: What happens if you all agree to close the business? Who gets what, and how are debts settled?
Do I Need a Deed Of Partnership? What Are the Risks If I Don’t Have One?
If you’re setting up a business with someone else-whether it’s as accountants, consultants, health practitioners, designers, tech founders, or even family members-you need an agreement. That’s especially true for professional practices and creative or technical collaborations, where responsibilities and contributions may not be equal or straightforward. Without a written partnership agreement, you’re relying on the old-fashioned Partnership Act 1890 to fill the gaps. While this offers some basic protections, you lose out on important flexibility and risk being caught out by these limitations:- No custom profit sharing: Legally, partners share profits (and losses) equally unless your agreement says otherwise-even if one partner did all the work or invested more cash.
- No exit strategy or lock-in: Any partner can dissolve the partnership at any time, with little notice. You might be left out in the cold unexpectedly.
- No process for admitting or removing partners: Bringing in a new collaborator, or dealing with a partner who wants out, can become messy fast.
- No confidentiality or restrictions: There’s no automatic protection for your confidential information, intellectual property, or business relationships.
Who Typically Uses a Partnership Structure?
Partnerships are a trusted business structure for a range of industries where:- Two or more people want to work side-by-side for a common goal, but don’t want the extra compliance and reporting requirements of a company.
- Professional services: Law firms, accountancy practices, medical or dental surgeries, and architectural studios routinely use partnership structures.
- Creative & consultancy businesses: Small marketing agencies, design studios, or consulting firms often set up as partnerships, especially if the partnership’s reputation depends on named individuals.
- Family businesses: Partnerships offer a flexible way for spouses or relatives to manage a venture together.
What Makes a Good Deed of Partnership? Professional Drafting vs. DIY
Given how much is at stake, it’s tempting to grab a free template online or cobble something together yourself. We get it-start-up costs add up quickly, and it might seem like a simple agreement. But legal documents are not the place to cut corners. Here’s why professional help makes all the difference:- Tailored to your needs: Off-the-shelf templates won’t reflect your unique arrangements, industry expectations or future plans.
- Clear, enforceable language: Vague or inconsistent clauses often lead to disputes, not solutions. Lawyers draft agreements to avoid these mistakes, keeping things plain and enforceable.
- Compliance with the law: Your agreement must reflect UK law, which changes over time-especially tax, employment and data protection rules.
- Dispute prevention: Good lawyers know where conflicts are likely to arise, and draft solutions in advance (for example, setting out what happens if a partner wants to sell their interest).
- Saves time and money later: The cost of fixing a legal mess or going to court is far higher than getting it right up front.
Common FAQs on Deed of Partnership (And Our Answers)
Do I Legally Need a Deed of Partnership?
You don’t have to have one, but it’s highly recommended. Default laws (the Partnership Act 1890) are very generic and may not suit your circumstances or industry at all. A deed is the best way to protect your business, clarify rights and obligations, and set a clear exit route if things change.Can I Draft My Own Partnership Agreement?
While possible, it’s risky. Many online templates are incomplete, not tailored to your situation, and may not be compliant with UK law. Unclear or poorly-drafted agreements can result in expensive disputes down the line-so it’s always better to get professional support. Need help reviewing or amending an agreement? Learn more about our contract review service.Do I Need a Lawyer to Set Up A Partnership?
Technically, no. But practically, it’s a wise investment to get professional legal advice-especially if any of the following apply to you:- You’re contributing significant money, assets or intellectual property
- You want to agree special terms around profits or roles
- You want clarity around exit, retirement or succession
- Your business is in a regulated industry (finance, healthcare, law, etc.)
- You want to protect trade secrets or confidential information
Can a Deed of Partnership Be Amended?
Absolutely-your partnership agreement can evolve as your business grows or shifts direction. Amendments should always be documented in writing (not just a handshake), signed by all partners, and ideally reviewed by a legal expert for coherence. Read more about amending contracts here.Key Takeaways
- A deed of partnership is your business’s legal safety net, locking in each partner’s rights, rewards, and exit options-from the very start.
- While you don’t legally need one, operating without a formal agreement leaves you exposed to unexpected disputes, sudden dissolution or unfair outcomes under the default Partnership Act 1890.
- Core areas your agreement should cover include contributions, profit sharing, decision-making, adding or removing partners, dispute resolution and what happens if things end.
- Partnering with a legal professional means your agreement will actually protect you-not just now, but as your business grows and faces new challenges.
- Don’t wait until there’s a disagreement: get your legal documents in place before you open your doors, and keep them up to date as your business evolves.
