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Why Taking Care to Get Business Partnerships Right is Crucial

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Many care home partnerships set off without formal arrangements - often initially founded on verbal agreements and assumed understandings.

hlw Keeble Hawson logoSharing a common purpose and the first flush of enthusiasm for a new commercial venture, partners can understandably often imagine they will never fall out. Subsequently, long hours managing and running a demanding business can take precedence over attending to legal administration.

Unfortunately, disagreements can, and do, arise - even among the closest of partners. And when they do, our experience is that it’s far easier to resolve when the parties have agreed in advance just what will happen in such an event.

While it’s true to say that the law will generally step in to provide a limited level of governance in circumstances when parties have no formal Partnership Agreement (courtesy of the provisions of the Partnership Act 1890), it is important to recognise that the Act applies a broad brush approach which is not suitable for all partnerships.

So how should partners operating a care home go about ensuring they get off on the right foot?

The precise terms of any Partnership Agreement will of course depend very much on the nature of the care home and the individual circumstances of its partners. However, there are a number of important considerations that, in our extensive experience, are usually relevant.

The first is to decide at the outset what will happen if a party wishes to leave the partnership. This is something that’s often overlooked, but it is far better to put in place a mechanism for dealing with it at the start (at a point where the partners are on good terms), rather than waiting until somebody wants to go - particularly as it may be contrary to the wishes of the other partners, or as a result of a dispute with them.

The Partnership Agreement should, then, clearly spell out whether or not the partnership will continue with the remaining partner(s). For example, how much will he or she be paid for their share? When will they be paid it? Without the protection of a Partnership Agreement, the Partnership may be forced to dissolve, which could potentially lead to the loss of important lucrative contracts.

The second is to set out any circumstances in which a care home partner can be forced by the other parties to leave the partnership. For example, if his or her performance falls below a certain level.

Thirdly, the majority of an active partner’s day is occupied with the home. It is therefore important to set out how it will be run and managed around them. Many care homes, for example, will have partners of varying experience and seniority and each individual is likely to want to take a difference approach to the day-to-day running of the business. It will help to identify early what is expected of each partner, such as how much capital is to be contributed and what happens financially if one partner is required to devote more time to the business than the others.

These are just a few of the many potential pitfalls of a failed practice partnership, so our advice – particularly with primary care in such a state of flux – is to seek help early and set firm foundations in place that will serve all parties in the event of a partnership coming to an end.

For further information, contact Rory Conwill, hlw Keeble Hawson, on 0114 252 1411 or roryconwill@hlwkeeblehawson.co.uk

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