Are you considering starting a business with a friend, family member or former colleague? It can be a fantastic way to combine complementary skills and build something meaningful—if you do it right from the outset. But entering a business partnership isn’t just a matter of goodwill or a verbal agreement. It’s a legal commitment that demands thoughtful planning, structure and ongoing care.

Want tailored legal guidance on entering a partnership? Contact Maddens Lawyers on 1800 815 228 or request a call back today.

Why a well-structured partnership matters

Partnering in business can bring mutual strengths and shared decision‑making. However, without proper planning, it can also lead to disputes, financial risk and even personal ruin. According to Victorian legal standards under the Partnership Act 1958, a valid partnership requires a genuine agreement, shared business activity, mutual obligations and a view to profit. If those corners aren’t squared away in writing and with legal clarity, the doors open wide to misunderstandings and liability.

1. Align on Vision, Values and Goals

Before you register your business or invest money:

• Discuss shared values and long‑term vision. Are you both aiming for rapid growth, maintaining lifestyle balance or planning for an eventual exit strategy?
• Assess appetite for risk. Are you comfortable with debt financing, scaling aggressively or entering new markets?
• Make sure work ethics align. One partner’s relaxed pace can frustrate another’s drive for results.

Getting aligned early creates smoother decision-making and helps ensure both parties remain committed and motivated as the venture evolves.

2. Clearly define Roles, Responsibilities and Decision-Making

One of the most effective ways to reduce conflict is to outline, from the beginning:

• Who runs daily operations?
• Who leads on marketing, finance, or client acquisition?
• How are decisions made, and who has veto power?

Will you have one CEO or shared leadership? Spell out accountability, and consider whether one partner has authority over operational decisions while the other focuses on strategy. Clear role definitions reinforce trust among staff, suppliers and investors.

3. Draft a Comprehensive Partnership Agreement

A written partnership agreement is absolutely critical—and legally advisable. This document should include:

• Ownership structure and capital contributions
• Profit and loss sharing arrangements
• Governance and voting rules, including rights to bind the partnership
• Dispute resolution mechanisms, such as mediation
• Exit strategies, including retirement, death, incapacity or voluntary departure
• Terms for admitting new partners

These components are essential under Australian partnership law, which includes general partnerships, limited partnerships and limited liability partnerships.

Additional legal steps include:

• Register your partnership with your relevant state regulator
• Open a dedicated business bank account
• Apply for an Australian Business Number (ABN) and register for GST or PAYG tax if required
• Arrange any licences or permits needed for your industry

Failing to document these elements can result in personal liability, especially in a general partnership where partners are jointly and severally liable for business debts and actions.

Starting a business with someone? For a full partnership agreement tailored to your needs, contact Maddens Lawyers via 1800 815 228 or use our contact form to request a call back.

4. Prioritise Open Communication

Regular, honest communication forms the backbone of a successful partnership. Set up structured checkpoints:

• Weekly or fortnightly meetings
• Monthly financial reviews
• Quarterly strategy sessions

Be open about issues, concerns or changes in personal circumstances. Attempting to resolve disagreements early prevents misunderstandings and resentment. If needed, include a mediation clause in your agreement to guide formal conflict resolution.

Maddens Lawyers can help you build communication and conflict‑resolution strategies into your partnership documents. Reach out now.

5. Review the Partnership Regularly and Plan Ahead

A partnership must evolve—personal goals, market conditions and competitive pressures change over time. Annual reviews should ask:

• Are your roles, vision and values still aligned?
• How does performance compare with competitors?
• Are you positioned to take advantage of new growth opportunities or mitigate emerging risks?

Effective review processes allow you to pivot when necessary, reallocate responsibilities, or revisit profit sharing. And, don’t forget to recognise milestones and success along the way—it helps to boost morale and reinforce the partnership.

Understanding Your Legal Risks and Obligations in Australia

Under state partnership acts, such as Victoria’s Partnership Act 1958, partners are regarded as both agents and principals. This means each partner can bind the business—and is liable for the acts of others. Even if one partner only contributed a small equity share, they may still be fully liable if the partner with more share becomes insolvent or negligent.

To limit exposure, options include:

• Setting up a limited partnership or limited liability partnership, where partner liability is capped
• Using trust structures or separate companies that can reduce risk exposure
• Taking out partnership liability insurance

You might also benefit from a legal audit to assess contract risk, insurance gaps, finance structures and IP protection. Learn more about our Business and Commercial legal services for ongoing structure and audit advice.

Internal Legal Steps and Support from Maddens Lawyers

Maddens Lawyers has over 70 years of experience in advising local businesses on partnerships, commercial structures, and succession planning. Our commercial and business law expertise covers:

• Business structuring and equity/debt finance
• Commercial contracts and liability management
• Buying and selling businesses, including exit provisions and due diligence
• Trusts, taxation, stamp duty and asset protection
• Industry‑specific advice including agribusiness partnerships and share‑farming agreements

We bring practical legal solutions that cater to business needs across South West Victoria.

Ready to prepare your partnership agreement or undertake a legal audit? Get in touch with Maddens Lawyers on 1800 815 228 or request a call back today.

Summary: Five Steps to a Strong Business Partnership

Step	Why It Matters
Align on vision and values	Ensures both are working toward common goals
Define roles and decisions	Creates clarity and avoids overlapping responsibilities
Draft a formal agreement	Provides legal certainty and outlines exits
Keep communication flowing	Minimises frustration and resolves conflicts early
Review regularly	Lets you adapt to change and stay competitive

Final Thoughts

Going into business with someone can be fulfilling and profitable—if started on a foundation of strong structure and mutual understanding. Entrepreneurs in Australia need to be especially aware of legal requirements, liability exposure, and the importance of formal documentation.

If you'd like to discuss forming your partnership, draft a customised partnership agreement, or review your business structure and contracts, contact Maddens Lawyers today. Phone us on 1800 815 228 or visit our Business and Commercial services page to book an appointment.

Take action now—make sure your business partnership starts right and stays strong.

About Maddens Lawyers

With more than 70 years of trusted service in South West Victoria and beyond, Maddens Lawyers offers expert legal advice in business law, commercial contracts, asset protection, dispute resolution, taxation law, trusts, and investment structures

Meet leaders like Principal Deepanshi Agarwal, who brings expertise in taxation and business law, and Managing Principal Fiona Giblin, with first-hand agribusiness experience supporting farming partnerships

Find out how Maddens Lawyers can help you. Call 1800 815 228 or request a call back today.