A partnership is created (without any need for any paperwork at all) whenever two or more people are in business together with a view to making money. Things are more complicated because there can also be what is known as a limited liability partnership (LLP). This, like a company, is a separate legal entity to the members and is generally seen as a half-way house between a partnership and a company.
Lots of partnerships have a written agreement (often prepared by a solicitor or accountant), although legally that is not necessary, that sets out the rules on how the partnership will be run. Otherwise, the partnership will be governed by the Partnership Act 1890.
Common problems that occur are where a partner or a member of an LLP is not pulling his/her weight and there is a desire to either suspend or expel that partner. Other situations are where the partners, or at least one of them, wishes to leave the partnership and decisions have to be made whether the partnership as a whole is dissolved (i.e. brought to an end) or if should it continue with one or more partners leaving. Alternatively, what happens when one or more partners wish to retire?
Often when the business has been originally set up there has not been the finances or time for the partners to prepare a good working Partnership Agreement. Then the matter gets forgotten about and only raises its head later on when there are conflicts within the partnership. The Partnership Agreement or LLP Agreement will normally deal with how disputes should be resolved.
The silent partner can bring its own complications. In essence he/she is simply a financial investor, has little or no say in its running and spends little or no time working within the business. But what if the business is being run badly? Most silent partners try to limit liability but that may not be successful.
See also our FAQ’s on Partnership Disputes.