Do we have to have a partnership agreement?
No, you don’t have to have one, but we strongly recommend that you do.
A partnership will be a partnership at will unless contrary intention can be proved. For this, there must be an express or implied agreement.
A partnership at will is a partnership where there is no fixed term agreed for the duration of the business. Without any formal agreement the partnership is subject to the terms of the Partnership Act 1890 by default in the eyes of the law. The 1890 Act is often unsuited to modern businesses as they are automatically dissolved when a partner dies, and it is impossible for a partner to retire without the same outcome. Unless there is agreement to the contrary, a partnership at will also calls for equal division of all of the business’ profits and losses in income and capital. This means that all partners are liable for any debts incurred by the business which could result in repaying creditors out of personal assets.
It can take very little for a partnership at will to be dissolved, for example any partner has a right to serve a notice to dissolve the partnership at any time.