Partnerships are collaborations between two or more people (known as partners), who contribute money, goods, knowledge and/or labour, with the object of making a profit that is then distributed among the partners. Partnerships have many advantages:
- they are easy and relatively cheap to set up
- they qualify for a range of tax benefits (such as startersaftrek, i.e. relief for new businesses);
- partners have a great deal of freedom to organise the way in which the partnership operates in accordance with their own preferences. This is because many of the rules governing partnerships are discretionary rather than mandatory;
- finally, provided that clear arrangements are made, it’s easy both for current partners to leave and for new partners to come in.
Partnerships are particularly popular as a legal status among small and medium-sized firms, in the agricultural industry and the property market, and among professionals such as doctors, lawyers and notaries.
The partners’ personal liability
There is, however, one notable drawback to the formation of a partnership, and this has everything to do with liability. Unlike corporate entities, i.e. private limited companies (BV) and public limited companies (NV), as well as associations, cooperative societies, mutual insurance associations, and non-profit-making foundations, partnerships do not possess what is called ‘legal personality’. This means, for example (with the exception of general partnerships, or VOFs), that partnerships do not have any capital of their own. The partners enter into contracts on the partnership’s behalf and, in doing so, are liable with their own personal assets. In other words, the basic rule is that they are personally liable for any debts incurred by the partnership.
It is precisely this personal connection that makes it so important to make clear, written arrangements with your partner (or partners).
- What happens, for example, if you fall out with your partner or if you can no longer work together for whatever reason?
What happens if you fall ill or your partner falls ill?
How should the partnership’s assets and liabilities be distributed if one partner wants to stop but the other partner wants to carry on?
Can you continue the business if your partner leaves?
How can you place a figure on the value of the business?
You can prevent a great deal of argument – and save a lot of time – by making clear arrangements in advance. And it’s worth seeking expert legal advice rather than simply downloading a document that you happen to find on the internet.
Why should you contact our company law lawyers?
Are you thinking of either launching or closing down a professional partnership (maatschap), a general partnership (vennootschap onder firma, or VOF) or a limited partnership (commanditaire vennootschap, or CV), or perhaps continuing the business on your own? Do you need advice on how to draft a new partnership agreement or on how to interpret the terms of an existing agreement? Are you perhaps involved in a dispute with one or more of your partners, or have you – or has one of your partners – been held jointly and severally liable by a creditor? Whatever questions you may have, you’re welcome to put them to one of our specialist team of lawyers at RWV Advocaten. We’ll be pleased to offer you practical advice and whatever assistance you may need.
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