When starting a business with others, you need to choose between three partnership structures. Each has different implications for personal liability, registration requirements, and ongoing compliance.

Key question - do you need limited liability?

The fundamental choice is whether you want personal protection from business debts. In a general partnership, you're personally liable for everything - including debts created by your partners. In an LLP, your personal assets are protected.

UK partnership types comparison

Comparison of ordinary partnership, limited partnership, and LLP structures.

Three partnership structures are available in the UK, each with different liability, registration, and governance requirements.

Ordinary (general) partnership: Not a separate legal entity. Partners personally liable for all debts (joint and several). No Companies House registration required. Governed by Partnership Act 1890.
Limited partnership (LP): Not a separate legal entity. General partners have unlimited liability; limited partners' liability capped at capital invested. Limited partners must not participate in management. Must register with Companies House. Governed by Limited Partnerships Act 1907.
Limited liability partnership (LLP): Separate legal entity (incorporated). Members not personally liable for partnership debts. Must register with Companies House. Must file annual accounts and confirmation statement. Governed by Limited Liability Partnerships Act 2000.

Set up a business partnership

General partnership - simplest structure

A general partnership is the default when two or more people trade together for profit. You don't need to register with Companies House, but you do need to register with HMRC for Self Assessment.

When to choose a general partnership

Low-risk business activities
You want minimal paperwork and compliance
Partners are comfortable with unlimited liability
Business has limited creditors or debt exposure
You want privacy (no public filing of accounts)

Key risks

Joint and several liability: Each partner can be held personally responsible for the entire debt, not just their share
Partner actions: You're liable for business debts incurred by any partner
No asset protection: Personal assets (home, savings) can be used to settle business debts

General Partnership registration and requirements

HMRC registration requirements for general partnerships. No Companies House registration needed.

Companies House registration: Not required
HMRC registration deadline: By 5 October in the partnership's second tax year
Registration form: SA400 (Registering a partnership for Self Assessment)
Partnership tax return form: SA800
Tax return deadline (online): 31 January following end of tax year
Tax return deadline (paper): 31 October following end of tax year
Partner liability: Unlimited - partners are jointly and severally liable for all partnership debts

A general partnership is defined by the Partnership Act 1890 as "persons carrying on a business in common with a view of profit". Each partner must also register individually for Self Assessment using form SA401.

Limited partnership (LP) - mixed liability

A limited partnership has two types of partner with different liability and management rights. This structure is commonly used for investment funds and property ventures.

When to choose a limited partnership

You have passive investors who want limited liability but don't need management control
Property investment or venture capital structures
General partners are willing to accept unlimited liability in exchange for full management control
You want pass-through taxation without creating an LLP

The management trade-off

Limited partners cannot participate in management. If a limited partner takes part in management decisions, they lose their limited liability protection and become liable as a general partner. This is the crucial trade-off in the LP structure.

Limited Partnership (LP) registration requirements

Companies House registration requirements and fees for Limited Partnerships in England, Wales, Northern Ireland, and Scotland.

Registration fee: £71
Processing time: Usually within 5 working days
Registration form (England, Wales, NI): LP5
Registration form (Scotland): LP5(s)
Name ending requirement: Must end with 'Limited Partnership' or 'LP'
Welsh name alternative: 'Partneriaeth Cyfyngedig' or 'PC' if principal place of business is in Wales
Minimum partners: At least 1 general partner and at least 1 limited partner

Limited Partnerships must be registered with Companies House under the Limited Partnerships Act 1907. The registration form requires: firm name, principal place of business, names of all partners (general and limited separately), nature of business, term of partnership (if any), and sum contributed by each limited partner.

Limited Partnership liability and management rules

Liability limits and management restrictions for general and limited partners in an LP.

General partner liability: Unlimited liability for all partnership debts and obligations
Limited partner liability: Liability limited to amount contributed to partnership
Limited partner management restriction: Cannot participate in management - loses limited liability protection if does so
Legal personality (England, Wales, NI): No separate legal personality - cannot hold assets or enter contracts in partnership name
Legal personality (Scotland): Has separate legal personality - can hold assets and enter contracts in its own name

The distinction between general and limited partners is fundamental to the LP structure. General partners run the business and bear full personal liability. Limited partners contribute capital but cannot be involved in management decisions without losing their liability protection.

Private Fund Limited Partnership (PFLP) registration

Registration requirements and fees for Private Fund Limited Partnerships.

New PFLP registration form (England, Wales, NI): LP7
New PFLP registration form (Scotland): LP7(s)
New PFLP registration fee: £71
Existing LP designation form: LP8
Existing LP designation fee: £10
Introduction date: April 2017

Private Fund Limited Partnerships were introduced in April 2017 to provide a more flexible structure for private investment funds. PFLPs benefit from reduced filing requirements compared to standard LPs and a 'white list' of activities that limited partners can perform without losing their limited liability status. PFLPs are not suitable for non-fund businesses or retail investor structures.

Limited liability partnership (LLP) - full protection with compliance burden

An LLP is a separate legal entity - it can own property, enter contracts, and sue or be sued in its own name. All members have limited liability and can participate in management. This is the most popular structure for professional practices (solicitors, accountants, architects).

When to choose an LLP

Professional practices with negligence exposure
All partners want limited liability protection
All partners want to participate in management
You're comfortable with public filing of accounts
Business activities carry significant liability risk

Trade-offs

Public accounts: Annual accounts must be filed at Companies House and are publicly accessible
Annual compliance: Confirmation statement and accounts filing required each year
Formation formality: Must register with Companies House before trading

Limited Liability Partnership (LLP) registration fees

Companies House registration fees and processing times for LLPs.

Online registration fee: £50
Same-day service fee: £78
Paper registration fee: £71
Online processing time: Usually same day
Same-day service deadline: Submit by 3pm Monday to Friday
Paper processing time: Longer than online
Registration form: LL IN01

Set up and run a limited liability partnership

Limited Liability Partnership (LLP) structure requirements

Minimum membership and liability rules for LLPs.

Minimum members: 2
Minimum designated members: 2
Member liability: Limited - members not personally liable for debts the business cannot pay
Management participation: All members can participate in management without losing liability protection
Legal status: Body corporate with separate legal personality
Name ending requirement: Must end with 'Limited Liability Partnership' or 'LLP'
Welsh name alternative: Partneriaeth Atebolrwydd Cyfyngedig

An LLP is a body corporate under the Limited Liability Partnerships Act 2000. Unlike a Limited Partnership, all LLP members have limited liability and can participate in management. Designated members have additional responsibilities including filing accounts and the confirmation statement.

LLP ongoing filing requirements and fees

Annual accounts, confirmation statement, and strike-off requirements for LLPs.

Accounts filing deadline: 9 months after accounting reference date
Confirmation statement frequency: At least once every 12 months
Confirmation statement fee (online): £34
Confirmation statement fee (paper): £62
Strike-off application form: LL DS01
Strike-off application fee: £44

LLPs must file annual accounts with Companies House, similar to limited companies. The confirmation statement (formerly annual return) confirms that company information held by Companies House is accurate and up to date. Failure to file accounts on time results in penalties and may lead to the LLP being struck off the register.

Decision matrix

Partnership types comparison

Key differences between General Partnership, Limited Partnership, and LLP structures.

General Partnership (GP): No Companies House registration. All partners have unlimited liability. All partners can manage the business.
Limited Partnership (LP): Must register with Companies House (fee £71). General partners have unlimited liability; limited partners' liability capped at contribution. Limited partners cannot manage.
Limited Liability Partnership (LLP): Must register with Companies House (fee £50 online). All members have limited liability. All members can participate in management.
Scottish Limited Partnership (SLP): Same as LP but has separate legal personality. Must file annual confirmation statement (fee £62) and register Persons with Significant Control.

All partnership types are taxed as pass-through entities. Partners report their share of profits on their personal Self Assessment tax returns. The partnership itself files a partnership tax return (SA800) but does not pay tax directly.

Low risk, informal arrangement: General partnership - simple, no registration, no public accounts
Passive investors with active managers: Limited partnership - limited partners protected, general partners manage
Professional practice or high-risk activities: LLP - all members protected, can all participate in management
Need privacy (no public accounts): General partnership or limited partnership (not LLP)
Want limited liability but not a company: LLP - separate legal entity but taxed as partnership

Tax treatment - all partnerships

All three partnership types are tax-transparent. This means the partnership itself does not pay tax. Instead:

Each partner reports their share of profits on their personal Self Assessment tax return
Partners pay Income Tax and Class 4 National Insurance on their profit share
The partnership files a partnership tax return (SA800) but this is purely informational
Losses can be offset against other income (subject to restrictions)

This is fundamentally different from a limited company, which pays Corporation Tax on profits before distributing to shareholders.

LIMITED LIABILITY PARTNERSHIP Advantage

A Limited Liability Partnership combines features of partnerships and companies:

Limited liability: Members' liability is limited to their capital contribution and any personal guarantees
Partnership taxation: Profits are taxed on individual members, not the LLP (no corporation tax)
Flexibility: Members can participate in management without losing liability protection
Separate legal entity: The LLP can own property, enter contracts, and sue in its own name

Popular with professional firms (solicitors, accountants, architects) who need liability protection but want tax transparency.

Comparison to other structures:

Unlike limited partnerships, all LLP members can participate in management without losing liability protection. Unlike general partnerships, members are not personally liable for the LLP's debts.

When this matters: When all partners want limited liability AND want to participate in management

Partnership agreement - essential for all types

Regardless of which structure you choose, a written partnership agreement is essential. Without one, the Partnership Act 1890 defaults apply - and these rarely reflect what partners actually intend.

Partnership Act 1890 default rules

Default rules that apply when no written partnership agreement exists or agreement is silent.

If you have no written partnership agreement, or your agreement is silent on a matter, the Partnership Act 1890 default rules apply automatically. These may not reflect your commercial intentions.

Profit and loss sharing (s.24(1)): All partners share equally in capital, profits, and losses - regardless of contribution
Partner remuneration (s.24(6)): No partner entitled to salary or remuneration for acting in partnership business
Management rights (s.24(5)): Every partner may take part in management of the business
Interest on advances (s.24(3)): 5% per annum on advances beyond agreed capital subscription
Interest on capital (s.24(4)): No interest payable on capital before profits are ascertained
New partners (s.24(7)): No person may be introduced as partner without consent of all existing partners
Ordinary decisions (s.24(8)): Decided by majority of partners
Fundamental changes (s.24(8)): Change to nature of partnership business requires unanimous consent
Partnership books (s.24(9)): Books kept at principal place of business; all partners have inspection rights

Partnership Act 1890 Section 24

Essential clauses in a partnership agreement

Key elements that should be included in a written partnership agreement.

A well-drafted partnership agreement should address these key areas to avoid relying on Partnership Act 1890 defaults.

Basic information

Full names, addresses, and contact details of all partners
Partnership trading name
Nature and scope of business activities
Commencement date and duration (fixed term or ongoing)
Principal place of business

Capital and finance

Initial capital contributions (cash, equipment, property, intellectual property)
Whether interest is paid on capital
Process for additional capital calls
Terms for partner loans to the partnership

Profit, loss, and drawings

Profit sharing ratio (equal, pro-rata to capital, performance-linked, or lockstep)
Loss sharing ratio (can differ from profit sharing)
Drawings - amount, frequency, treatment against profit share
Any salary or guaranteed payments

Management and decisions

Day-to-day management responsibilities
Voting rights (one partner one vote, or weighted)
Reserved matters requiring unanimity (new partners, major expenditure, sale of business)
Deadlock resolution provisions

Partner obligations

Time commitment (full-time, part-time, holiday, sickness)
Non-compete restrictions during partnership
Confidentiality obligations

Exit and dissolution

Exit mechanisms (retirement, expulsion, death provisions)
Valuation method for departing partner's share
Payment terms (lump sum, instalments, deferred)
Post-exit restrictive covenants

Dispute resolution

Escalation process (negotiation, mediation, arbitration, litigation)

Partnership restrictive covenants

Post-exit restrictions on partners and their enforceability in the UK.

Restrictive covenants protect partnership business when a partner leaves. Courts enforce longer restrictions in partnership agreements than in employment contracts due to more equal bargaining power.

Non-compete: Restriction on setting up or working for competing business. Typical duration 6-24 months, limited to specific geographic area.
Non-solicitation of clients: Restriction on approaching partnership clients after departure
Non-solicitation of staff: Restriction on poaching partnership employees
Non-dealing: Restriction on accepting business from partnership clients (even if client approaches)
Enforceability test: Must protect legitimate business interest; must be no wider than reasonably necessary in duration and geographic scope
Government 3-month proposal: Proposed employment non-compete limit of 3 months specifically excludes partnership agreements

Partnership agreement solicitor costs

Typical costs for professional drafting of a partnership agreement.

Professional legal advice is strongly recommended for partnership agreements. Using a solicitor helps ensure the agreement reflects partners' intentions, avoids ambiguity, and overrides inappropriate Partnership Act defaults.

Typical cost range: £200-£600 depending on complexity
Factors affecting cost: Number of partners, complexity of profit sharing, property or IP involved, regulatory requirements
Find a solicitor (England and Wales): Law Society Find a Solicitor service at solicitors.lawsociety.org.uk
Find a solicitor (Scotland): Law Society of Scotland at lawscot.org.uk/find-a-solicitor

When solicitor involvement is essential

Complex profit sharing arrangements
Significant capital contributions
Property or intellectual property involved
International elements
Regulated industries (solicitors, accountants, medical)
Multiple partners

Find a Solicitor (Law Society)

Assess your liability exposure

Consider the nature of your business. High-risk activities (professional services, construction, property) benefit more from limited liability protection.
Decide on management rights

If all partners want to participate in management with limited liability, choose LLP. If you have passive investors, LP may work.
Consider privacy requirements

LLP accounts are public. If you need privacy, general partnership or LP may be preferable.
Draft a partnership agreement

Cover profit sharing, capital contributions, decision-making, exit provisions, and disputes. Get legal advice for complex arrangements.
Register appropriately

General partnership: HMRC only. LP: Companies House (£71) then HMRC. LLP: Companies House (£50 online) then HMRC.

Business Context Testing

Content Graph

Guvnor

Choose a partnership structure

Key question - do you need limited liability?

General partnership - simplest structure

When to choose a general partnership

Key risks

Limited partnership (LP) - mixed liability

When to choose a limited partnership

The management trade-off

Limited liability partnership (LLP) - full protection with compliance burden

When to choose an LLP

Trade-offs

Decision matrix

Tax treatment - all partnerships

LLPs offer limited liability with partnership taxation

Comparison to other structures:

Partnership agreement - essential for all types

Assess your liability exposure

Decide on management rights

Consider privacy requirements

Draft a partnership agreement

Register appropriately

Compliance Assistant

🧪 Business Context Testing

◉ Content Graph

Key question - do you need limited liability?

General partnership - simplest structure

When to choose a general partnership

Key risks

Limited partnership (LP) - mixed liability

When to choose a limited partnership

The management trade-off

Limited liability partnership (LLP) - full protection with compliance burden

When to choose an LLP

Trade-offs

Decision matrix

Tax treatment - all partnerships

LLPs offer limited liability with partnership taxation

Comparison to other structures:

Partnership agreement - essential for all types

Assess your liability exposure

Decide on management rights

Consider privacy requirements

Draft a partnership agreement

Register appropriately

Related guides in Business Structure

Business Context Testing

Content Graph