partnership agreements

PARTNERSHIP AGREEMENTS Cynthia Cummings, Employment Adviser Why have a written Partnership Agreement? • ensures the proper conduct of the business arrangement • avoids future disputes • negates the need to have a partnership at will Partnership at Will • Partnership Act 1890 • Partnership at Will requires dissolution when partners leave or join • With an agreement this can be negated • Necessary to protect financial aspects New Partner • The Partnership Agreement can be worded so a new partner can be included in the partnership by the use of a short addendum • Agrees to bound by terms of existing agreement • Parity within 3 years of joining(maximum) What needs to be in the Partnership Agreement? • • • • • • Date of agreement Names and addresses of partners Title of firm (Business Names Act 1985) Address of practice premises The nature of the business Commencement and duration The Capital • • • • • Property Equipment Drugs stocks Fixture/fittings “Working capital” Premises Ownership/Rent/Payments • • • • • • • • Expenses of the partnership Premises costs Employee costs Accountancy Stationary Bank charges Practice telephones Should be paid before profits divided Personal Expenses • Home • Home telephone • Car Income of the Partnership • • - All professional fees and earnings Posts outside the practice part-timers seniority payments postgraduate education allowance Division of receipts • Partnership agreement should state each partners share and allow for any future adjustments • To be properly represented as a partner. PCT must be satisfied that: • Has appropriate profit share of at least Full time = 1/3rd of greatest 3/4 time = 1/4 of greatest 1/2 time = 1/5 of greatest Attention to the affairs of the firm • Time commitment to practice should be stated • Usually expected to devote substantially all their time and attention • Outside work must not conflict • Permission should be gained from others • Should not be unreasonably withheld Tax • No longer joint and several liability on the partnership profits but • each partner will have to complete an annual self assessment for Inland Revenue • Agreements need to provide for the keeping of records • Partnerships may have a tax reserve account Staff • The agreement should not allow summary dismissal • All partners would be liable for an unfair or constructive dismissal • All should have opportunity to voice opinion • Tribunal limit for wrongful dismissal no £50,000+ Decision Making • Most matters settled by majority or • eg 6 partners - decisions of 4:2 3 partners - unanimity • All entitled to be heard • Any partner not a party to the making of the decision is not bound by it Unanimous decisions • Change of partnership business • Admittance of a new partner • Dismissal of staff members Holidays and Study Leave • Should be separated allocations • Should be same for all partners • Restrictions on how many may be off at one time • Employment of locums Sickness Absence • Personal Health Insurance/income protection/locum expenses • PCT contribute towards locum • Most practices cover the first month • Larger practices sometimes cover longer • Expulsion for lengthy incapacity • LEAVING PARTNERSHIP Leaving the Partnership Voluntarily • Notice period • Usually at least 3 months • Detail mechanism for sorting out finances eg premises, drawing, capital Leaving the practice involuntarily • Lengthy incapacity • Bankruptcy • Removal/suspension from register or medical list • Gross breach of partnership agreement • drug or alcohol addiction • No Green Socks Clauses! Retirement • Terms of Service require GPs to retire at 70 • Retirement possible before 70 - for agreement • Need to consider possibility of “carrying” an elderly partner not capable of doing fair share of work Restrictive Covenant • To be enforceable, it must be reasonable • Patients of practice at time of leaving • One year • Two mile - of practice area Defence Body Membership • It is essential and the agreement should oblige partners to subscribe Arbitration • BMA will mediate only in a dispute • Provision for an arbitrator needed • However avoid use of arbitrator if possible - EXPENSIVE! Banking and Accounts • Bankers and Accountants should be named • Provisions for drawing cheques • Free access to accounts for all partners AND FINALLY When joining a partnership • Get a “feel” for the practice and partners • Ask to see accounts and other books • Look for fairness and equity • Have the partnership agreement checked by local BMA Office • Remember - there are more GP vacancies than GPs to fill them at the moment GET IT RIGHT! Salaried GPs PCT Contracts • Employed directly by PCT NHS conditions should continue Contract of Employment • Employee of Practice • Governed by practice terms and conditions • Will previous NHS Service be recognised? • Within the contract:• Parties • Location • Pay • Salary - range and starting salary Leave Annual - how much? • When? • Application? Study - how much? When? application? Who pays? Sick leave • notification and certification • entitlement to paid sick leave Maternity leave • requirements on advising practice • entitlement to pay • Notice Period • Work outside the practice • Defence Body • membership • subscription • Mileage allowance • Telephone allowance