Before You Shake Hands: What Every Australian Business Partnership Needs to Get Right
- Barry Money
- Jul 26
- 4 min read
Updated: Jul 30
Going into business with a partner can be exciting. Whether you're teaming up with a friend, a colleague, or a seasoned investor, having someone share your vision and workload seems like a smart move. But here’s the catch — good intentions aren’t a substitute for strong legal foundations.
Too many partnerships in Australia begin informally, only to unravel when disagreements, cash flow issues or exit strategies aren’t properly documented. If you're thinking about forming a business partnership, here’s what you need to know before you commit.
Why Handshake Deals Just Don’t Cut It
In Australia, it’s still common for business partners to rely on verbal agreements or DIY templates. But these informal arrangements can leave you personally exposed to:
Business debts
Disputes with no clear resolution path
Unrecoverable investments
Unclear control over bank accounts or IP ownership
Once conflict arises, courts may have to rely on text messages, email threads, or verbal testimonies — an expensive and unpredictable process.
Choosing the Right Business Structure
Not all partnerships are created equal. One of the most important early decisions you’ll make is selecting the right legal structure for your venture. The main options include:
Company: A separate legal entity with limited liability, governed by the Corporations Act 2001 (Cth). Ideal for growth and risk protection. A shareholders’ agreement is essential.
Partnership: Easier to set up, but partners are usually personally liable for each other's actions. Governed by state-based Partnership Acts. A formal partnership agreement helps reduce risk.
Joint Venture: Common for one-off projects. Best supported by a detailed joint venture agreement outlining responsibilities, profits, and exit terms.
Each structure has its pros and cons when it comes to tax, control, liability, and succession planning — and that’s where professional input makes all the difference.
What Should Be in a Formal Agreement?
A professionally drafted agreement helps prevent conflict by clearly defining everyone’s expectations from day one. It should include:
Roles, responsibilities, and authority of each partner
Ownership of intellectual property
Capital contributions and profit-sharing
Exit strategies and buy-sell arrangements
Dispute resolution procedures
Deadlock and decision-making mechanisms
And here’s a red flag: If your prospective partner resists documenting anything — take that as a sign to pause. A reluctance to formalise often reflects a reluctance to be held accountable.
Trust Is Not a Legal Strategy
We often hear things like:
“We’re friends — we don’t need to get lawyers involved.”
Unfortunately, friendships don’t prevent disagreements, especially when money and business pressure come into play. In fact, partnerships between friends or family can become the most emotionally draining and financially damaging when they go south.
A solid agreement doesn’t signal mistrust — it signals professionalism.
Plan Your Exit While You’re Still on Good Terms
No one wants to think about a business break-up when the venture’s just beginning. But setting exit terms early helps avoid bitter disputes later. You’ll want to outline:
What happens if a partner wants to leave?
How will you value and transfer their share?
What if someone becomes incapacitated or dies?
Who gets the final say during a deadlock?
How will profits or losses be handled on exit?
Treat this like a business prenup — uncomfortable now, priceless later.
Practical Steps Before You Sign Anything
Here’s a quick checklist before locking in a partnership:
Get the right structure for your goals — with advice from an accountant or lawyer.
Document your agreement properly (don’t rely on templates).
Record financial contributions and ownership percentages from day one.
Define day-to-day responsibilities clearly.
Register the business and protect intellectual property early.
Anticipate problems, and agree on how to solve them now.
Don’t DIY Your Legal Protection — Get Matched with the Right Lawyer
At Bane Legal Services, we know that solid partnerships start with the right professional support. While we’re not a law firm and don’t provide legal advice, we draw on over 30 years of business experience to connect you with commercial lawyers who specialise in partnership agreements and business structuring.
We take the guesswork out of finding the right legal expert — so you can focus on growing your business with confidence.
Frequently Asked Questions
Q: Can’t we just use an online template for our partnership agreement?
A: Most online templates are too generic and miss key issues like decision-making, buyouts, or how to handle disputes. They’re often a false economy that leads to future conflict.
Q: Is it too late to formalise our agreement if we’ve already started operating?
A: It’s never too late — but the sooner, the better. The longer you wait, the more complicated things become if disagreements arise.
Q: Which business structure offers the best liability protection?
A: Generally, a company structure offers better protection, but it depends on your business goals, risk appetite, and tax considerations. A commercial lawyer can help assess your situation.
Disclaimer: This article is general information only and is not legal advice. Bane Legal Services is not a law firm. Always seek qualified legal advice tailored to your situation before making business decisions.
Need help finding the right lawyer for your business partnership?
Contact Bane Legal Services today — your trusted legal matchmaking partner in Australia.
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