Go into business with someone and the law writes your rules for you
Two people, one business, no paperwork — and a law from 1890 quietly running the show. It's almost never the deal you'd have chosen.
By Robert Festenstein, Head of Legal
Updated 28 June 2026
6 min read
The short version
- No written agreement? A general partnership runs on the Partnership Act 1890 — equal splits, personal liability, and any partner can dissolve the lot on notice.
- An LLP gives you limited liability, but still needs a members' agreement to work properly.
- Cover profit share, decisions, capital, joiners and leavers, and disputes.
- Review it when the business changes — a stale agreement can be as risky as none.
The rules you didn't pick
Start carrying on a business with someone for profit, without incorporating, and the law may decide you're in a partnership — whether you meant to be or not. And with nothing in writing, that partnership runs on the Partnership Act 1890.
Read that date again. This Victorian default splits profits equally no matter who put in what, makes each partner personally liable for the debts, and lets any partner blow up the whole thing on notice. Nobody who thought about it for five minutes would sign up to that. Most people just never think about it.
Partnership or LLP?
Plenty of professional and family businesses use a limited liability partnership instead — partnership flexibility, but with your personal assets behind a wall. The catch: an LLP without a members' agreement falls back on its own set of unsuitable default rules. Whichever structure you pick, the agreement is the thing that makes it fit your business.
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What a good one covers
- Money in, money out. Who contributed what, and how profits and losses get split.
- Decisions. What needs everyone's agreement and what a managing partner can just get on with.
- Joining and leaving. How new partners come in, and how a departing partner's share is valued and paid.
- Death, illness, retirement. What happens to a partner's stake.
- Protection and deadlock. Keeping the business safe when someone leaves, and a route through disagreement.
Keep it alive
An agreement that no longer matches how you actually run the business can be worse than none, because it ties you to terms you've outgrown. Revisit it when partners change, the split shifts, or the business turns a corner. Like a shareholder agreement, it's a living document — not something to sign once and bury in a drawer.
Frequently asked questions
What happens if partners don't have a written agreement?
A general partnership falls back on the Partnership Act 1890 — equal profit shares regardless of contribution, personal liability for the debts, and any partner's right to dissolve the whole thing on notice. Very few people would choose those terms on purpose.
Is an LLP the same as a partnership?
An LLP is a separate legal entity that gives its members limited liability, unlike a traditional partnership where partners are personally on the hook. But it still needs a members' agreement — without one, unsuitable default rules apply.
How is a leaving partner's share valued?
However the agreement says — which is the whole point of having one. Without agreed valuation and payment terms, a partner's exit can turn into an expensive fight, or even force the business to wind up.
Sources & further reading
This article is general information, not legal advice. The law changes and depends on your circumstances — always take advice on your specific situation before acting. Last reviewed 28 June 2026. Buzz Solicitors is a trading name of AD Solicitors Limited, a recognised body regulated by the SRA (no. 8011228).
A solicitor with more than two decades' experience in commercial law, dispute resolution, insolvency and judicial review. Robert acts for businesses, directors and individuals on the matters that carry real consequence — and leads Buzz Solicitors.
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