Partnership Agreement Template for Professional Services Businesses (UK 2025)
Last updated: February 2025
Why Professional Services Businesses Need a Partnership Agreement
Professional services partnership agreements govern traditional equity partnerships and the increasingly common alternative of limited liability partnerships where professionals combine their practices. These must address profit sharing, capital contributions, management responsibilities, client ownership, and exit provisions. For regulated professions, the agreement must comply with the relevant regulatory body's requirements for practice structures and insurance arrangements.
Key Clauses for Professional Services
- Profit sharing formula including lockstep or merit-based models
- Capital contribution requirements and drawings policy
- Management structure, voting rights, and decision-making thresholds
- Retirement, expulsion, and exit provisions including restrictive covenants
Common Mistakes
- Not including clear expulsion provisions for underperformance, misconduct, or regulatory breaches
- Failing to address the tax implications of profit sharing, capital accounts, and retirement provisions, particularly the difference between equity and salaried partners
Template Sections
- Profit sharing and capital accounts
- Management and governance structure
- Exit provisions and restrictive covenants
FAQ
What is the difference between equity and salaried partners in a professional services firm?
Equity partners own a share of the practice, contribute capital, share profits and losses, and have voting rights. Salaried partners are essentially senior employees with the partner title but no ownership stake, fixed remuneration, and limited governance rights. The partnership agreement should clearly define each category, and tax treatment differs significantly as HMRC will look at the substance of the arrangement.
What exit provisions should a professional services partnership agreement include?
Include provisions covering voluntary retirement with notice periods of typically 6-12 months, compulsory retirement age if applicable, expulsion for cause such as misconduct or regulatory breach, and garden leave provisions. Address the calculation and payment of the departing partner's capital account, any goodwill payment, and restrictive covenants covering client solicitation for typically 12 months post-departure.
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Get Started FreeThis is guidance for UK businesses, not legal advice. Templates are illustrative. Consult a solicitor for complex matters.
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