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If you’re thinking of starting a partnership, there are a number of things you need to have in place before you begin. One of the most important aspects is having the correct documentation in order. As we approach 2025, ensuring your legal paperwork is up to date is more crucial than ever.
This is because your documents will set out all your legal obligations clearly and help protect you from potential risks down the track. Reviewing and updating your agreements regularly can ensure your business remains compliant with current Australian law. For additional support, you might want to read our guide on Business Set Up – Ideas and Plans for further insights.
What Is A Partnership?
A partnership is a common type of business structure where two or more people come together to manage a business with a shared purpose. In this model, the business is not a separate legal entity, meaning that the partners are jointly and severally responsible for the partnership’s obligations.
This can include responsibilities such as buying and selling property, entering into contracts, paying damages, and repaying debts. The advantage of a partnership is its relative ease and affordability of setup, although it is vital to have your legal documents in place to avoid personal liability issues later on.
Types Of Partnerships
The Partnership Act 1982 (as amended up to 2025) sets out three primary types of partnerships:
- Normal partnerships
- Limited partnerships
- Incorporated limited partnerships
What distinguishes these types of partnerships is the extent of liability undertaken by the partners.
General Partnership
This falls under normal partnerships. In a general partnership, all partners share equal responsibility for managing the business and are jointly and individually liable for all debts and obligations incurred. While this structure offers simplicity and cost-effectiveness, it does expose each partner to unlimited personal liability.
Limited Partnership
In a limited partnership, the liability of the partners is structured according to their roles. Limited partners contribute capital and have liability restricted only to the extent of their investment, whereas at least one general partner remains personally liable for the business’s obligations. This can be a useful arrangement if some partners prefer a less hands-on role while still investing in the venture.
Incorporated Limited Partnership
An Incorporated Limited Partnership is similar to a limited partnership, except that the partnership itself becomes a separate legal entity through incorporation. Typically, one partner is designated with unlimited liability (often the general partner), while the remaining partners enjoy limited liability protection. This structure can provide additional credibility and is particularly suited for ventures that plan to grow in scale.
When deciding on the type of partnership, it’s important to consider the nature of your business, your long-term goals, and the level of involvement and risk that each partner is willing to accept. For more on choosing the right business structure, you might also find our article on Sole Trader vs Company insightful.
What Documents Do I Need?
Partnership Agreement
A Partnership Agreement is a legally binding document that outlines the responsibilities, obligations, and expectations of each partner. This agreement covers crucial elements such as:
- How income and losses are to be distributed
- The investment contributed by each partner
- The goals and objectives of the business
- Standards of conduct and key regulations
- Policies on onboarding new partners
- The decision-making process
- The procedure if a partner chooses to exit the business
Having these details in writing is essential, as it ensures that if disputes arise, there is a clear, legally binding framework to refer to. In 2025, with changes to commercial practices and increased focus on transparency, keeping your agreement current is paramount.
Dissolution Of Partnership Deed
A Dissolution Of Partnership Deed (or Partnership Dissolution Agreement) marks the end of the partnership. This document outlines the process for winding up the business, including the division of assets, the effective date of dissolution, liquidation procedures, and the ongoing obligations of the partners after the partnership comes to a close.
Memorandum Of Understanding (MoU)
A Memorandum of Understanding (MoU) is an informal document that outlines the intentions of all parties and summarises key terms before they finalise a formal, legally binding agreement. It’s a useful step to ensure everyone is on the same page from the outset.
This document is particularly beneficial during the early stages of negotiations, allowing all parties to outline the fundamentals of the partnership without the complexities of a full legal contract.
Employment Contract
Employment Contracts are vital when hiring staff or engaging third-party vendors. These agreements clarify rights, responsibilities, and terms of employment, thereby preventing misunderstandings down the track.
Standard employment contracts typically include details such as:
- Salary and wage structures
- Leave and superannuation entitlements
- Rights and responsibilities
- Termination and notice procedures
Since each employment relationship can differ significantly, it is advisable to consult with a lawyer to tailor your contracts appropriately. You can also explore our comprehensive guidance on how important an employment contract is for your business.
Profit Share Agreement
A Profit Share Agreement is critical in a partnership as it outlines how profits (and losses) will be divided among partners. Clearly documenting this arrangement can help prevent disputes in the future, ensuring that all partners have a mutual understanding of financial expectations.
It’s beneficial to review and update this agreement regularly, especially as your business grows and market conditions change. For further reading on securing your financial interests, consider our article on shareholders and unitholders agreements.
What Kinds Of Clauses Should I Include?
Exclusivity Clause/Non-Compete
Many businesses utilise exclusivity clauses and Non-Compete Agreements to protect their intellectual property and trade secrets. These clauses prevent employees or partners from engaging in activities that could benefit competitors, thereby helping you maintain your competitive edge.
Ensuring such clauses are clearly drafted is an essential part of your partnership documentation, particularly in a market as competitive as Australia in 2025.
Confidentiality Clause
Building a successful partnership requires trust, but it also means protecting your business’s sensitive information. A Confidentiality Clause holds partners and employees accountable for keeping proprietary information private. This can include business strategies, customer data, and any other sensitive information that could give competitors an advantage if disclosed.
Force Majeure
In any business venture, unexpected events can occur that disrupt normal operations. A force majeure clause recognises that events outside your control – such as severe weather conditions, natural disasters, or other emergencies – may prevent you from fulfilling contractual obligations.
This clause is fundamental in today’s unpredictable environment, ensuring that if, for example, extreme weather in 2025 causes significant disruption (as seen in other sectors), you can be exempt from certain performance obligations as long as the clause’s conditions are met.
| Example Imagine John was scheduled to deliver a major food order for a local grocery store by Friday. Severe flooding in Sydney disrupts transportation, damaging his delivery vehicle. If a force majeure clause is in the contract – and the clause defines these extreme weather conditions as a qualifying event – John may be exempt from his delivery obligations. However, if the clause specifically excludes such events, then his duty to perform remains despite the adverse conditions. |
Privacy Policy
In 2025, having an online presence is almost obligatory for your business. A well-drafted Privacy Policy is crucial to inform visitors how their data is being handled. This document not only helps maintain compliance with the most recent privacy laws but also builds trust with your customers.
If you collect personal data — whether it be cookies, email addresses, names, or payment information — transparency is key. For businesses with an annual turnover exceeding $3 million, the Privacy Act 1988 (as updated for 2025) mandates strict compliance, including the implementation of a clear Privacy Policy.
Even if the Act does not legally apply to your business, adopting comprehensive privacy practices – such as creating a Data Breach Response Plan and implementing Work From Home Policies – can be a wise move. In today’s digital economy, maintaining transparency about data handling practices is a competitive advantage.
Further, as remote work continues to evolve, ensure you also consider our tips on Building a Team – Employees and Contractors to safeguard your partnership’s interests.
ASIC
Although legal documents can seem daunting, don’t forget about your basic administrative duties. Submitting the proper documents and forms to ASIC remains a critical step in ensuring your partnership is recognised and compliant with current legislation.
You will need to register your business name with ASIC unless your partnership is operating under the names of all the partners. It’s also important to regularly review the associated fees and regulations, as these can change from year to year – particularly with updates expected as we move further into 2025.
Key Takeaways
There’s a lot to consider when starting a partnership. Whether you’re deciding on the most suitable business structure or ensuring all your internal policies are robust, engaging with a legal professional can help you navigate these complexities with confidence. Remember to regularly update your legal documents in line with current legislation to protect both your personal and business interests.
Our co-founder answers some common legal questions from clients who are thinking of starting a business. He covers important points that could help you hit the ground running – watch the video here:
If you would like a consultation on your options going forward, please reach out to us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat. For additional legal insights on business structures, also consider our resources on Legal Requirements for Starting a Business and Intellectual Property to keep your venture solid and compliant in 2025.
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