Comparing business structures

Set up a business partnership

How to register a partnership and understand partner responsibilities.

UK-wide
Guide summary

Choose a partnership type (general, LP, or LLP), draft a written agreement, and register with HMRC or Companies House. The nominated partner must file tax returns and keep records for 5 years.

  • Choose between general partnership, LP, or LLP
  • Draft a written partnership agreement
  • General partnership: register with HMRC only
  • LLP: register with Companies House then HMRC
  • Appoint a nominated partner for tax returns
  • File annual partnership tax return (SA800)
  • Partners pay Income Tax on their profit share
  • Keep financial records for 5 years
  • LLP must file annual accounts with Companies House
  • General partners have unlimited personal liability
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UK-wide Partnership

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A business partnership is when 2 or more people agree to share the profits and responsibilities of running a business. Unlike a limited company, a partnership is not a separate legal entity - each partner is personally liable for business debts.

Types of partnership

General partnership
All partners share unlimited personal liability for business debts. No registration with Companies House required.
Limited partnership (LP)
Has general partners (unlimited liability, manage business) and limited partners (liability capped to investment, cannot manage).
Limited liability partnership (LLP)
All members have limited liability. Must register at Companies House. Best for professional practices.

General partnership

The simplest partnership structure. No legal registration required (though a written agreement is essential).

Key characteristics

  • Unlimited personal liability: Each partner is personally responsible for all partnership debts, including debts incurred by other partners
  • Partnership Act 1890 defaults: If no written agreement, profits are shared equally and partners cannot be removed without consent
  • Tax-transparent: Partnership doesn't pay tax - each partner pays Income Tax on their share of profits

Registration

No Companies House registration required. The nominated partner must:

  1. Register the partnership with HMRC for Self Assessment
  2. File an annual partnership tax return
  3. Ensure all partners are registered for Self Assessment

Limited liability partnership (LLP)

An LLP combines the flexibility of a partnership with limited liability protection. Popular for professional practices (law firms, accountants, architects).

Key characteristics

  • Limited liability: Members not personally liable for other members' negligence or misconduct
  • Minimum 2 members: Can be individuals or corporate members
  • Designated members: Minimum 2 required - responsible for filing accounts and statutory returns
  • Tax-transparent: Same as general partnership - members pay Income Tax on their profit share

Registration

Must register at Companies House (Form IN01). Annual requirements:

  • Confirmation statement (see Companies House fees)
  • Annual accounts filing
  • Maintain PSC (People with Significant Control) register

Partnership agreement essentials

Without a written agreement, the Partnership Act 1890 applies by default - this often doesn't reflect what partners intended.

Key clauses to include

  • Profit and loss sharing: Percentages for each partner (default is equal)
  • Capital contributions: How much each partner contributes and how this is treated
  • Decision-making: Voting rights, majority requirements, reserved matters
  • Management roles: Who manages day-to-day operations
  • Drawings: How partners withdraw money from the business
  • Exit provisions: Notice periods, buy-out valuation, restrictive covenants
  • New partners: How new partners are admitted
  • Dispute resolution: Mediation or arbitration procedures
  • Dissolution: Process for winding up the partnership

Tax treatment

Partnerships are tax-transparent - the partnership itself doesn't pay tax. Each partner:

  • Receives a share of partnership profits (per agreement or equally)
  • Files a personal Self Assessment return declaring their share
  • Pays Income Tax and Class 4 NI on their profit share

Partnership tax return

The nominated partner must file a partnership tax return (SA800) showing total partnership income and how it's allocated between partners.

  1. 1

    Choose your partnership type

    General partnership for simplicity, LLP if you need limited liability protection (especially for professional practices).

  2. 2

    Draft a partnership agreement

    Cover profit sharing, capital, decision-making, exit provisions, and disputes. Get legal advice for complex partnerships.

  3. 3

    Register the partnership

    General partnership: Register with HMRC only. LLP: Register with Companies House then HMRC.

  4. 4

    Appoint a nominated partner

    This partner is responsible for filing the partnership tax return and managing HMRC correspondence.

  5. 5

    Set up record-keeping

    Track partnership income, expenses, and each partner's share. Keep records for 5 years.