Business Partnerships – A partnership is a type of business structure where two or more parties work together without setting up a limited company.
Business Partnerships – Partnerships generally operate in a similar way to sole traders – they are simpler to set up, and do not have many of the requirements that limited companies do. On the downside, business partnerships usually come with unlimited liability, meaning that the partners will be financially responsible for any debts against the partnership, putting them personally at risk of bankruptcy or insolvency.
However, it is possible to set up a Limited Liability Partnership (LLP), which offers the same protections that a limited company would.
Business Partnerships – There are very few limitations on becoming a partner in a business – as long as each partner is over 18, they can be a part of that partnership. Limited companies can also be partners.
Setting up a business partnership
Most business partnerships do not need to be registered with Companies House. All you need to do is choose a name for the partnership, choose the “nominated partner” (the partner who will manage tax returns and business records) and register the partnership with HMRC.
Business Partnerships – However, if you are setting up a limited liability partnership, it will need to be registered with Companies House. To do this, you will need to specify at least two “designated partners” – they take on more responsibilities than other members, similar to the nominated partner in other business partnerships.
You will also need to draw up an LLP agreement, which will specify, among other things, the responsibilities of members, how profits are shared, and how members can leave or join the partnership. It may be worth seeking legal advice when putting together this agreement.
You can also see our Limited Companies section for advice on registering with Companies House.
If you are not forming an LLP, you do not need to draw up a partnership agreement – in fact, you could be considered to be in a partnership even if you and your partners have not made any sort of written or verbal agreement.
However, it is worth setting up a partnership agreement if you are forming a partnership, as it will give you and your partners more control over what you can do in the partnership.
For example, under the Partnership Act 1890, it is impossible to remove current members from the partnership, or add members without consent from all members – for example, if your partner wanted to leave the partnership and you wanted to replace them with someone else, you would need to dissolve the current partnership and create a new one.
Without a partnership agreement to say otherwise, any profits earned by the company are shared equally by all partners, regardless of how much time or investment each partner puts into the business.
Get legal advice for your business
Getting legal advice for your business can be tricky, as you often need specialised advice that you can’t get from a consumer legal advice service.
However, if you do need business legal advice, our Instant Law Line service could be of great help to you.
We can give you telephone legal advice on all aspects of business law in the UK, all for a low monthly or one-off fee.