About business partnerships
A partnership allows two or more people to share responsibility for a business. This journey guides you through choosing your partnership type, creating an agreement, registering, and meeting your ongoing tax obligations.
There are three types of partnership in the UK: general partnership, limited partnership (LP), and limited liability partnership (LLP). Each has different liability, registration, and compliance requirements.
Compare general partnership, limited partnership, and LLP to find the right structure for your business.
Partnership types at a glance
The main difference between partnership types is liability protection. In a general partnership, partners are personally liable for all business debts. In an LLP, liability is limited to your capital contribution.
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 £124). 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 £100 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 £110) 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.
LLP registration fees
If you choose an LLP, you'll register with Companies House rather than just HMRC.
Online registration fee
£100 (from 1 February 2026)
Same-day service fee
£156 (from 1 February 2026)
Paper registration fee
£124 (from 1 February 2026)
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 (opens in a new tab)
Protect your partnership with an agreement
A written partnership agreement is not legally required, but operating without one is risky. Without an agreement, the Partnership Act 1890 default rules apply - and these rarely match what partners actually intend.
Draft an agreement covering profit shares, decision-making, exits, and disputes.
Partnership Act 1890 defaults
These rules apply automatically if you don't have a written agreement - or if your agreement is silent on a particular issue.
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 (opens in a new tab)
What your agreement should cover
A comprehensive agreement prevents disputes by setting clear expectations from the start.
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)
Professional drafting costs
For complex partnerships or significant capital, professional legal drafting is recommended.
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) (opens in a new tab)
Register your partnership
Registration requirements depend on your partnership type. General partnerships register with HMRC only. Limited partnerships and LLPs must first register with Companies House.
Register with HMRC for Self Assessment. LPs and LLPs also register with Companies House.
How partners pay tax
Unlike limited companies, partnerships are 'tax transparent'. The partnership itself does not pay tax - instead, each partner pays Income Tax and National Insurance on their share of profits through Self Assessment.
Understand how partnership profits are taxed on individual partners.
Tax transparency principle
Partnership profits flow through to partners who then pay tax individually.
A partnership is not separately taxable . Partnership profits are taxed on the individual partners, not on the partnership itself. This is known as the tax transparency principle .
Partners are generally taxed in the same way as other businesses conducted by sole traders or companies, depending on partner type.
Individual partners
Pay Income Tax and National Insurance on their share of profits
Corporate partners
Pay Corporation Tax on their share of profits
Registration deadline
By 5 October in the partnership's second tax year
Partner National Insurance
Partners pay Class 4 National Insurance on their share of profits. Class 2 is no longer compulsory.
Class 2 threshold
£7,105 a year in profits
Class 2 at or above threshold
Treated as paid, nothing to pay
Class 2 voluntary rate
£3.65 a week
Class 4 lower profits limit
£12,570 a year
Class 4 upper profits limit
£50,270 a year
Class 4 main rate
6% on profits over £12,570 up to £50,270
Class 4 additional rate
2% on profits over £50,270
Tax year
2026/27 (from 6 April 2026)
Partners pay National Insurance as self-employed individuals on their share of partnership profits. Most people pay Class 2 and Class 4 contributions through Self Assessment.
Self-employed National Insurance rates (opens in a new tab)
Annual tax returns
Each year, the nominated partner files a partnership tax return (SA800) and each partner files their own Self Assessment return. The partnership return shows how profits are allocated; partners then report their share on their personal return.
The nominated partner files the partnership return. Each partner also files a personal return.
Partnership return deadlines
Same deadlines as individual Self Assessment - miss them and every partner faces penalties.
Paper return deadline
31 October following the end of the tax year
Online return deadline
31 January following the end of the tax year
Example: 2024/25 tax year (paper)
31 October 2025
Example: 2024/25 tax year (online)
31 January 2026
Notice issued after 31 July
Paper: 3 months after the notice date
Notice issued after 31 October
Paper or online: 3 months after the notice date
Company partner, accounting date 1 February to 5 April
Online: 12 months after the accounting date; paper: 9 months
Partnerships must file form SA800 even if the partnership made a loss. You cannot use HMRC's online service to file a partnership return, so you need commercial software to file online.
The dates above are the earliest HMRC can set. If the notice to file reaches the partnership late, the deadline is 3 months after the date of the notice (or 31 January if later, for online returns). Where a partnership includes a company and its accounting date falls between 6 April and 31 January, the 31 October and 31 January dates apply.
Self Assessment deadlines (opens in a new tab)
Late filing penalties
Penalties are charged to each partner individually, not to the partnership.
Initial late filing
£100 per partner
3+ months late
£10 per day per partner (up to 90 days maximum)
6+ months late
£300 fixed penalty (or 5% of tax due if greater)
12+ months late
Further £300 or 5% per partner (whichever is greater)
Penalties are per partner, so a partnership with 4 partners filing 1 day late would incur £400 in penalties (£100 x 4 partners). Interest also accrues on any unpaid tax.
Ongoing compliance
General partnerships have minimal ongoing requirements beyond tax returns. LLPs have additional obligations similar to limited companies - annual accounts and confirmation statements must be filed with Companies House.
LLP annual filing requirements
LLPs must file accounts and a confirmation statement with Companies House each year.
Accounts filing deadline
9 months after accounting reference date
Confirmation statement frequency
At least once every 12 months
Confirmation statement fee (online)
£50 (from 1 February 2026)
Confirmation statement fee (paper)
£110
Strike-off application form
LL DS01
Strike-off application fee
£13 online or £18 on paper (from 1 February 2026)
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.
Ongoing compliance obligations for limited liability partnerships.
Making changes to your partnership
Partners may join or leave, profit shares may change, or you may need to update your agreement. Each change has tax implications and may require notification to HMRC or Companies House.
Tax treatment when partners change
Changes to the partnership during the tax year affect how profits are allocated and reported.
New partner
Reports their allocated share of partnership profits for the part of the tax year in which they are a partner
Leaving partner
Reports their allocated share of partnership profits up to their departure date
Partnership continuity
The partnership trade normally continues when partners join or leave unless the trade itself permanently ceases
Current basis
Tax-year basis applies from 2024/25; the former partner-level notional-trade rules no longer apply
From 2024/25, continuing partnership profits are reported on the tax-year basis and allocated between partners under the partnership agreement for the periods in which they are partners. ITTOIA 2005 sections 852 to 856, which previously treated each partner as carrying on a notional trade, were omitted from 6 April 2024.
Tell HMRC when partners join, leave, or when the nominated partner changes.
When the partnership ends
Whether you're closing voluntarily, following a dispute, or because circumstances have changed, you must follow a proper winding-up process. This includes notifying HMRC, filing final tax returns, and distributing assets in the correct order.
Agree when the partnership ends, finish its business and pay what it owes, then share out what is left.
Dissolution triggers
A partnership can dissolve automatically or by deliberate action. Understand what triggers dissolution.
Under the Partnership Act 1890, certain events automatically dissolve a partnership unless the partnership agreement provides otherwise. Most written agreements exclude automatic dissolution on death or bankruptcy.
Expiration or notice (s.32)
Fixed term expires, single venture completes, or any partner gives notice (if no fixed duration)
Death of partner (s.33)
Automatic dissolution unless agreement provides otherwise
Bankruptcy of partner (s.33)
Automatic dissolution unless agreement provides otherwise
Charging order on share (s.33)
May be dissolved at option of other partners if partner's share is charged for separate debt
Illegality (s.34)
Any event making partnership business unlawful
Dissolution by court order (s.35)
A court may order dissolution on these grounds:
Mental incapacity of a partner
Permanent incapacity of a partner
Partner's conduct prejudicial to business
Wilful or persistent breach of agreement
Business can only be carried on at a loss
Just and equitable to dissolve
Partnership Act 1890 (opens in a new tab)
The partnership is a legal person
A partnership has a legal personality of its own, distinct from its partners, so it can own property, make contracts and sue or be sued in its own name. A partner can still be made to pay the firm's debts, and is liable for them severally as well as jointly. After paying, a partner is entitled to relief from the firm and the other partners.
This affects property ownership, contracts and legal disputes. It does not change your tax obligations.
Partnership Act 1890, section 4 (opens in a new tab)
You must register for VAT when your taxable turnover passes the registration threshold in any rolling 12 months, or when you expect it to pass the threshold within the next 30 days alone.
Start with the insurance the law requires: if you employ anyone, you must have employers' liability insurance with at least £5 million cover, and business vehicles need motor insurance.
Get professional help with partnership agreements and disputes.