In drafting a partnership agreement, the following elements should be included:
- The name and address of the partnership
- The duration of the partnership. This states the termination date or a clause stating that the partnership exists until all partners agree to dissolve it or upon the death of a partner.
- The purpose of the business. This can be left open for purpose of future expansion or stated to avoid ambiguity.
- Bank account information. In this section, you list the bank accounts that apply to the partnership business.
- Contributions of partners. A partner’s contribution may be in cash or in-kind e.g., property or service rendered or service to be rendered.
- Compensation for partners. These details the distribution of profits and/or salary.
- Management authority. Here you state the obligations and operational responsibilities of each partner. You also state which decisions require the consent of all partners and which decisions can be voted on. You also state what happens in case of a tie.
- Terms to be adhered to when adding new partners. State the terms that may require the inclusion of new partners and how to go about accepting new partners in the business setting.
- Working hours and vacation periods. State the period in which the partnership is opened or closed each day or as a vacation period.
- The outside business activities that partners may engage in. You can list what partners can do or what they cannot engage in terms of business activities so that to avoid conflicting interests.
- Disposition of the name of the partnership should a partner leave
- How to solve disputes in the partnership
- Terms in which the partnership can be bought or sold
In summary, anyone who intends to start and run a partnership business in Hong Kong must first register with the Business Registration Office of the Inland Revenue Department (IRD) within the first month of starting the business. It is important to note that both the Limited Partnership and the Joint Venture are treated the same way when it comes to taxation and both are legal entities in the Hong Kong government.
At Paul Hype Page, we are well versed in corporate tax planning and can help ensure you make full use of the various incentives for businesses, to ensure you do not overpay for your taxes. This includes knowledge on existing Double Tax Avoidance agreements in the region and around the world, for wherever you decide to expand your business.