Partnership Insolvency options, solutions & benefits for professional and other firms

Unlike the directors of a limited company, general partners in a partnership have personal liability for all of the debts of the partnership business, unless they are operating a Limited Liability Partnership.

What is a Partnership?

Section 1 of The Partnership Act 1890 defines a Partnership as a relationship, "which subsists between persons carrying on a business in common with a view of profit."

Therefore in plain English, if two or more people work together in a business, they are likely to be considered to have formed a Partnership.

Partnership Agreement

Quite often when people enter into a partnership it is done informally.  If this is the case the provisions of The Partnership Act 1890 will apply, which will mean that each partner has an equal share of the profits.

It is however advisable to have a formal Partnership Agreement, which sets out the rights and responsibilites of each partner, how their share of the profits is calculated, and the process to be adopted should the partnership come to an end.  When drafting a Partnership Agreement, it is also best to obtain legal advice.

Partnership Insolvency Options

Where a partnership is insolvent there are a number of options for the partners to consider: -

• Liquidation (of the partnership)

• Bankruptcy (of the individual partners)

• Partnership Voluntary Arrangement (PVA)

• Partnership Administration Order

• Individual Voluntary Arrangements (IVA)

Those options do not at first sight appear encouraging however huge financial benefits can be obtained by restructuring your partnership financial affairs in a pre planned way.

Purnells have acted in informal rescues and in formal Partnership Voluntary Arrangement's, Individual Voluntary Arrangement's and Administrations for firms of solicitors, chartered accountants, chartered surveyors, architects and other professional firms. This part of the website is written to explain the insolvency options open to professional partnerships and other partnerships. Click on each of the above partnership insolvency options to learn more.