Accounts and Cash Management in Partnership Agreements
11) Liability sharing
If any liabilities are accumulated by the partnership, then it is important that you determine how much each partner will be responsible for all debts owed and owing to the business
Example: “Each partner will be liable for all debts incurred by the partnership at a rate equal to the individual ownership in the business stated in section 7. Likewise, all amounts owed to the business have split responsibility at the same rate”.
12) Business bank account/cash management
The name and address of the bank for the business will be listed in this section along with any terms and conditions that will associate how all partners will interact with the bank. This may include the maximum amount of money that can be drawn before the transaction requires the signature of all partners.
Further, you may specify a period for when money will be put into the bank, say, as soon as it is received or every Monday, etc. You may even assign a certain partner(s) to deal directly with any bank services that may be required.
Example: ” The business bank account will be opened at the XYZ Bank addressed at 16 City Lane, City, Postcode. After which, all partners can draw cheques for business purposes up to the amount of GBP 1000. For amounts that exceed this figure, the cheque will require the signature of all partners. Cheques credited to the name of the business will be paid into the partnership account on the same day it is received”.
13) Accounts
This will state when the accounts will be completed and who will do the accounts. If it is not going to be done by any of the partner’s, you should give the name and address of the person/service that will do so.
Example: “The business accounts will be completed by John Smith and Clare Jones twice a year in six-monthly periods on March 31st and September 31st. In the event of a partner not being capable of completing the accounts through illness, accident or death, the accounts will be completed by the remaining partner. Should both partners be incapable of preparing the accounts, they will be given to ABC Accounting Services Ltd for completion”.
14) Holiday entitlement
This will state the number of days that each partner can take off work (annually) and receive full pay.
Example: “For every six months of trading, all partners are entitled to 14 days holiday with full pay. These days are to be agreed by all partners”.
15) Illness and incapability
If a partner develops an illness or has an accident therefore making them incapable of doing their job, specific terms can be made in which to compensate for the matter. This may include the maximum period at which the partner will receive full pay and benefits, say 10 weeks. If the period of recovery lies beyond this time, you may adopt an agreement that says the partner will not receive any more money from the business until they commence work. Further, you can even agree that the partner is to be released from the partnership with a pay-off of an agreed figure.
If any women are in the partnership, you should specify the amount of pay and profit sharing that they will receive during maternity leave.
Example: “In the event of a partner falling ill or being incapable of doing their duty, they will continue to receive maximum benefits outlined in section 10 for a period of three months. If the period of recovery falls beyond this time, this partner may be released from the partnership by the remaining partner who will notify them in writing via recorded delivery to the last known address. The payoff for this release is the same as the retirement package that is given in section 16.
In the event of Clare Jones becoming pregnant, she is entitled to full benefits outlined in section 10 for the duration of her maternity”.
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