Add or remove a partner

Start with your partnership agreement

Your partnership agreement, or for an LLP your members' agreement, should say how a partner joins, how they leave, what notice they must give, how their share is valued and paid out, and whether the business carries on. Follow it. Where a general partnership has no written agreement, or the agreement is silent, the Partnership Act 1890 fills the gaps. Under those default rules a new partner can only join with the consent of every existing partner.

Check whether the partnership carries on

In a general partnership with no agreement to the contrary, a partner's death or bankruptcy, or notice from any partner in a partnership with no fixed term, ends the partnership. The remaining partners then have to wind it up or form a new partnership to carry on the business. A well-drafted agreement avoids this by saying the business continues and the others buy out the leaving partner's share. An LLP is a separate legal person, so it carries on whoever joins or leaves. It needs at least 2 members: if it trades with only 1 for more than 6 months, that member becomes personally liable for the debts it runs up after that, if they know it has only 1 member.

Protect the leaving partner from future debts

In a general partnership, every partner is personally liable for the firm's debts. A new partner is not liable for debts run up before they joined. A partner who leaves stays liable for debts run up while they were a partner. They can also be liable for debts the firm runs up after they leave, to anyone who dealt with the firm before and has not been told they have gone.

To end that risk, tell the firm's customers, suppliers and lenders in writing, and publish a notice in the Gazette for everyone else. The partners who remain should agree to take over the firm's debts and indemnify the leaving partner. Paying out a partner's share can create a capital gain for them, which may qualify for Business Asset Disposal Relief.

Tell HMRC

A new individual partner registers for Self Assessment as a partner. The nominated partner shows each partner's share of profit, and the dates they joined or left, on the partnership tax return. A partner who leaves and stops trading must tell HMRC they have stopped being self-employed. If the partnership is registered for VAT, update the partners' details with HMRC on form VAT2.

Limited partnerships: tell Companies House

A limited partnership must send Companies House a statement of any change in its partners, including a limited partner becoming a general partner or the other way round, and of changes to a limited partner's contribution. Each general partner commits an offence if the statement is late.

LLPs: tell Companies House

An LLP must tell Companies House when a member joins or leaves, or when a member's details change, including whether they are a designated member. A new individual member must have verified their identity with Companies House first. Until notice of a departure is filed, people who do not know a member has left can treat them as still being a member.