2 Matter Plans Included
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ALERTS - Nil
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Full Commentary - Partnerships
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Reference materials
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AI Prompts
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Electronic Signing and Witnessing
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Looking to the Future
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101 Costs Answers
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Business Structures and the Comparative Table
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Further information
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Overview
A partnership is a common form of business structure that:
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Summary of the process
The usual steps to establish a partnership are:
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A. Getting the matter underway
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File cover sheet - Partnerships
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To do list - Partnerships
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First steps
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Client details and verifying identity
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Retainer instructions - Partnerships
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Conflict of interest check
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Initial letter to client enclosing costs agreement
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Library of costs agreements
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Australian Capital Territory
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Costs agreement - ACT
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New South Wales
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Costs agreement - NSW
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Northern Territory
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Costs agreement - NT
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Queensland
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Initial letter to client enclosing costs agreement
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Costs agreement - QLD
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Abbreviated costs disclosure - Costs under $3000
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South Australia
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Costs agreement - SA
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Tasmania
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Costs agreement - TAS
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Victoria
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Costs agreement - VIC
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Western Australia
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Costs agreement - WA
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Standard costs disclosure form for clients - Fees under $3000
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Time and costs estimates
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If required - Updating costs disclosure
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Letter to client updating costs disclosure
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Charge securing costs
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Guarantee securing costs
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Costs disclosure before settlement in litigation matters
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Letter to client - Costs disclosure before settlement - NSW, VIC, and WA
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Letter to client - Costs disclosure before settlement - QLD, SA, TAS, ACT, and NT
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General deeds, agreements, execution clauses, and statutory declarations
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Deeds and Agreements
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Deeds
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Deed for general use
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Deed of guarantee
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Deed of release
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General deed of indemnity
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Deed of assignment of agreement
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Deed of gift
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Library of standard clauses for deeds
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Amendment
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Confidentiality for defined information - All parties
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Confidentiality for defined information - One party
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Confidentiality for terms of deed - All parties
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Confidentiality for terms of deed - One party
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Costs
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Counterparts
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Dispute resolution
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Events beyond control
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Governing law and jurisdiction
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Interpretation
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No assignment
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Notices
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Severance
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Waiver
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Whole agreement
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Agreements
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Agreement for general use
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Heads of agreement
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Non-disclosure agreement - Formal
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Non-disclosure agreement - Informal
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Library of standard clauses for agreements
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Amendment
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Confidentiality for defined information - All parties
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Confidentiality for defined information - One party
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Confidentiality for terms of agreement - All parties
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Confidentiality for terms of agreement - One party
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Costs
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Counterparts
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Dispute resolution
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Events beyond control
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Governing law and jurisdiction
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Interpretation
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No assignment
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Notices
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Severance
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Waiver
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Whole agreement
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Execution clauses
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Library of execution clauses for agreements
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Attorney
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Authorised officer
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Company
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Company - Sole director
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Individual
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Individual - No witness
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Library of execution clauses for deeds
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Attorney
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Authorised officer
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Company
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Company - Sole director
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Individual
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Statutory declarations
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Commonwealth statutory declaration
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Statutory declaration - blank - ACT
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Statutory declaration - blank - NSW
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Statutory declaration - blank - VIC
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Statutory declaration - blank - QLD
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Statutory declaration - blank - TAS
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Statutory declaration - blank - SA
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Statutory declaration - blank - WA
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Statutory declaration - blank - NT
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Standard annexure note for documents
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Standard annexure note for documents
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B. Establishing a partnership
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Partnership structures
A partnership is an agreement between two or more individuals, or partners, to carry on a business together with a view of profit. A company may be a partner.
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Establishing a partnership
Establishing a partnership is a relatively simple process. Broadly, the legal and financial requirements include:
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Powers, rights, and responsibilities of partners
Each partner is an agent of the other partners. All their actions and decisions in carrying on the business can bind the other partners. Consequently, partners are expected to conduct themselves in business for the joint advantage of the other partners and avoid conflicts between their own personal ...
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Eligibility as a general partner or manager
A person seeking to be a general partner or the manager of a limited partnership or incorporated limited partnership is not eligible if they are:
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The partnership agreement
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Partnership agreement
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Limited partnership agreement
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AI Prompt for Letter to client with advice on partnership agreement
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Letter to client with draft partnership agreement
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Letter to partners - Notice of general partnership meeting
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Minutes of meeting
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Library of clauses for partnership agreements
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Representative clause for corporate partners
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Managing partner
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Obligation to give notice of termination of partnership
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Additional reasons for expulsion
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If required - Forms for registration of limited and incorporated limited partnerships
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NSW
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Application for registration of a Limited Partnership - NSW - Department of Finance, Services and Innovation
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Application for registration of an Incorporated Limited Partnership form - NSW - Fair Trading
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VIC
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Limited partnership application - VIC - Consumer Affairs
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Incorporated limited partnership application - VIC - Consumer Affairs
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QLD
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Application for registration of a limited liability partnership - QLD - Department of Justice and Attorney-General
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Application for registration of incorporated limited partnership - Queensland Government
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WA
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Application for registration of an incorporated limited partnership - WA - Department of Mines, Industry Regulation and Safety
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Application for registration of a limited partnership - WA - Consumer and Business Services
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Partnership property
Although general partnerships and limited partnerships have no independent legal personality, they can hold property in certain circumstances. Partnership property does not include a partnerʼs personal property. Partnership property must be held and used by the partners exclusively for the ...
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Apportionment of liability
General partnership and limited partnership In both general and limited partnership structures:
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Taxation
Partnerships lodge an income tax return but have no direct liability to pay tax. A firmʼs income is taxed indirectly through the partners. Certain limited partnerships have a direct liability to pay tax.
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If required - Library of precedents for small business clients
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Agreement for supply of goods and services
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Credit application
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Director guarantee
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Dispatch and delivery policy
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Example - Job descriptions
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Example tax invoice
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Liability waiver and consent
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Privacy policy
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Returns and refund policy
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Terms of trade
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Website terms of use for advertising and booking personal services
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Website terms of use for downloadable online products
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Website terms of use for physical products
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C. Succession planning and unexpected events
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Buy and sell agreements
A buy and sell agreement, also known as a put and call agreement, takes precedence over a will when providing for a partnerʼs death. As the partnerʼs interest in the partnership assets will be transferred under the contract, the partnership can avoid any claims against their estate or delays ...
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Buy and sell option agreement
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Funding arrangements for buy and sell agreements
Buy and sell agreements are usually supported by insurance policies taken out against the death or total permanent injury of any of the partners. On either event, the proceeds of the policy are used to pay for the outgoing partnerʼs interest. The partners can hold this insurance policy in:
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Buy and sell option agreements funding arrangements explanation
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Buy and sell option - Funding agreement
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Letter to client with draft buy and sell option and funding agreement
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Policy register
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Succession agreement for partnership
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Letter to partners - Notice of general partnership meeting
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Minutes of meeting
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D. Dispute resolution
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Mediation
Mediation involves an impartial and independent third party appointed by agreement between the parties or a mechanism in the partnership agreement. This mediator works with the parties, together or separately, to help them reach agreement and resolve the dispute. Mediation outcomes are not binding ...
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Litigation
In litigation, disputing parties ask the court to determine the outcome. The courtʼs decision is binding on the parties and enforceable. Litigation is the most expensive and time-consuming method of dispute resolution.
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Letter to other partners - Notice of a partnership dispute
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E. Exiting, ending, and reconstituting a partnership
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Exiting, ending, and reconstituting a partnership
Several methods and options are available to a partner who wishes to leave or terminate a partnership that was created for an undefined term or ongoing purpose, or bring it to an end. The partner's exit method and the options available to other partners depends on the type of partnership. General ...
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Letter to other partners - Notice of expulsion from partnership
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Deed of assignment of interest in partnership
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Deed of variation of partnership as to profit share
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Letter to other partners - Notice of admission of new partner
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Agreement for admission of incoming partner
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Letter to client with draft agreement
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If required - Forms to vary a limited or incorporated limited partnership
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NSW
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Application for Changes in Registered Particulars of a Limited Partnership - NSW - Department of Finance, Services and Innovation
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VIC
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Notice of change of particulars of partners - Consumer Affairs Victoria
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Application for change of name of limited partnership - Consumer Affairs Victoria
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Notice of change of terms and/or conditions of a limited partnership - Consumer Affairs Victoria
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QLD
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Change of details relating to limited liability partnership – Department of Justice and Attorney-General
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Change in registered details of incorporated limited partnership - Department of Justice and Attorney-General
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WA
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Notification of changes to registered particulars - Government of Western Australia – Department of Mines, Industry Regulation and Safety
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Letter to partners - Notice of general partnership meeting
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Minutes of meeting
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Letter to other partners - Notice of intention to dissolve the partnership
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Letter to other partners - Notice of retirement or resignation
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Letter to other partners - Notice of intention to dissolve partnership with no previous partnership agreement
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Winding up
On notice of dissolution, the remaining partners may decide to wind up the partnership. If so:
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Agreement for dissolution of partnership with one partner and continuation of business by the other
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If required - Forms to end a limited or incorporated limited partnership
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NSW
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Notice of Dissolution or Cessation of a Limited Partnership - NSW Department of Finance, Services and Innovation
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VIC
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Notice of dissolution or cessation of a limited partnership - Consumer Affairs Victoria
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QLD
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Dissolution or cessation of a limited liability partnership - Department of Justice and Attorney-General - Queensland
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Cessation of business by an incorporated limited partnership - Department of Justice and Attorney-General - Queensland
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WA
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Notice of dissolution or cessation of limited partnership - Government of Western Australia - Department of Mines, Industry Regulation and Safety
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Notice of revocation or cessation of incorporated limited partnership - Government of Western Australia - Department of Mines, Industry Regulation and Safety
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If required - Other documents that may be required upon dissolution of a partnership
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General powers of attorney
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New South Wales
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General power of attorney - Client 1
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Land Registry Services form
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General power of attorney
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Queensland
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General power of attorney
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South Australia
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Power of attorney
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Tasmania
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General power of attorney
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Victoria
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General Non-Enduring Power of Attorney
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Western Australia
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General power of attorney
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Clause for power of attorney to dissolve partnership
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Partition agreement on dissolution of partnership
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F. Finalising the matter
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Letter to client finalising the matter
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Example invoices incorporating notification of rights
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Example invoice incorporating notification of client's rights - NSW
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Example invoice incorporating notification of client's rights - VIC
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Example invoice incorporating notification of client's rights - QLD
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Example invoice incorporating notification of client's rights - SA
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Example invoice incorporating notification of client's rights - TAS
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Example invoice incorporating notification of client's rights - ACT
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Example invoice incorporating notification of client's rights - NT
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Example invoice incorporating notification of client's rights - WA
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Closing the file
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File closing checklist
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Comments and suggestions for By Lawyers
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Business Structures and the Comparative Table
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Overview
This publication assists with:
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A. Comparative table
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Comparative table
The table below considers the following factors:
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B. The structures
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Sole proprietorship
A sole proprietorship, commonly known as a sole trader, is the simplest business structure. Its main characteristic is that the business does not have a separate legal identity from its owner. It is owned and operated by one individual who bears full responsibility for all debts and liabilities of ...
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Partnership
A partnership is a relationship between persons carrying on a business in common, with a view to making a profit. A minimum of 2 partners is required to form a partnership: s 1 of the Partnership Act 1892. The maximum number of partners allowed is 20: s 115 of the Corporations ...
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Company
Unlike partnerships and sole traders, a company is a legal entity distinct from its shareholders. There are 4 main types of companies:
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Joint venture
A joint venture is a commercial relationship between 2 or more entities for the purposes of a particular undertaking, with a view to realising mutual commercial gain. Joint ventures are usually established for a specific purpose. Unlike partnerships, joint ventures are not notional tax ...
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Trust
A trading trust is a business structure in which a trustee holds property, incurs liabilities, earns income, and distributes that income on behalf of the trust's beneficiaries. The trustee is personally liable for these activities unless otherwise agreed with the counterparty involved in the ...
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Association
Associations are typically not regarded as business structures because they primarily aim to provide protection for a committee and members of a group that usually engages in 'not for profit' activities.
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C. Comparing the structures
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Income tax
The primary way to minimise tax is by income 'splitting', which involves diverting income to the lowest tax rate entity. A sole trader and a partnership of individuals are less favourable options as they cannot split income.
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Capital gains tax
Taxable capital gains are included in the total taxable income of the entity for the income year in which the capital gains tax event occurs, and the marginal tax rate is then applied. Taxation on capital gains is more advantageous than that on ordinary income due to various concessions, including ...
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Land tax
Land tax in New South Wales Land tax is an annual tax calculated on the total value of taxable land above the land tax-free threshold. Revenue NSW provides the current rates on their Land tax page.
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Asset protection
Asset protection is the capacity of a business structure to shield its owners and operators from personal liability for debts related to the business.
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Control and succession
Most clients seek to minimise their tax liability, protect their assets, and retain full control of their affairs.
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Set-up and running costs
Set-up and ongoing running costs can be an important consideration for small and medium-sized businesses.
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Flexibility
To compare the flexibility of the structures, each is given a score from the least flexible to the most flexible. All have wide investment choices and general powers.
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D. Other considerations
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The small business concessions
Division 152 of the Income Tax Assessment Act 1997 sets out numerous small business relief concessions for capital gains tax. There is a common set of eligibility criteria. The importance of structuring asset ownership to qualify for these concessions cannot be over emphasised. With the ...
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Trust losses and family trust elections
In the event that a family trust incurs losses, then the client should obtain appropriate advice on whether or not the losses can be carried forward and whether or not a family trust election needs to be made. The complex rules involved are outside the scope of this commentary but mention is made ...
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Relationship between entities, names and trade marks
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Transfer duty
New South Wales – Landholder duty The duty on transferring shares and units was abolished in 2016. However, for companies and trusts that are land rich, duty is payable on these transactions.
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Appendix – Example sale structures from a tax perspective
Example 1 – Tax advantages of a vendor selling shares Tax advantages of a vendor selling shares in the company rather than the company selling the business.
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