{"id":1006,"date":"2021-12-29T03:35:34","date_gmt":"2021-12-29T03:35:34","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=1006"},"modified":"2025-07-02T00:42:28","modified_gmt":"2025-07-01T23:42:28","slug":"start-business-partnership","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/start-business-partnership\/","title":{"rendered":"How to Start a Business Partnership in England and Wales"},"content":{"rendered":"

Starting a new business on your own can be daunting, making it ideal to operate as a partnership. You may be looking to go into business with another person. Perhaps you are entering into a partnership with a friend or family member. Maybe you have been approached to join an existing business as a partner. However, before you commit, it is essential to understand the nature of a business partnership.\u00a0<\/span><\/p>\n

This article will explain the two most common forms of business partnerships in England and Wales:\u00a0<\/span><\/p>\n

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  1. unincorporated partnerships;\u00a0<\/span><\/li>\n
  2. limited liability partnerships.<\/span><\/li>\n<\/ol>\n

    \u00a0We also explore how to create and operate them.<\/span><\/p>\n

    Partnerships vs Limited Liability Partnerships<\/span><\/h2>\n

    There are two main kinds of partnerships in the UK: partnerships that are unincorporated (\u201cpartnerships\u201d) and limited liability partnerships (LLPs), which are incorporated.\u00a0\u00a0<\/span><\/p>\n

    Partnerships<\/span><\/h2>\n

    Partnerships come into being automatically when two or more people carry on business \u201cin common\u201d with the view to making a profit. It is a broad definition. In practice, it is usually apparent when you are working in a partnership.\u00a0<\/span><\/p>\n

    Partners in a partnership typically share the profits and losses equally. However, you will have the flexibility to amend and alter these if you create your own partnership agreement.<\/span><\/p>\n

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    Each partner\u2019s share of the profits will be taxed as part of their own personal income, which must be disclosed to <\/span>HM Revenue Council<\/span><\/a> (HMRC).\u00a0<\/span><\/p>\n<\/div>\n

    \u201cJoint and Several Liability\u201d\u00a0<\/span><\/h3>\n

    Partnerships are unincorporated, meaning that the partnership does not have a separate legal existence. As a result, the partnership cannot own assets or property. Instead, one or more partners will own the asset in their personal capacity and hold it \u201con trust\u201d for the other partners. An explanation of how \u201ctrusts\u201d work in a commercial context can be found here.\u00a0<\/span><\/p>\n

    Likewise, the partnership cannot enter into its own contracts.<\/span><\/p>\n

    Therefore, when referring to the \u201cbusiness\u201d of a partnership, the law only recognises the partners themselves. This helps explain why partners are \u201cjoint and severally liable\u201d for the debts of the partnership and each of the partners. <\/span><\/p>\n

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    For example, suppose your business partner enters into a contract with YouBev on behalf of the partnership. Likewise, your partner does not pay the amount agreed to. In that case, YouBev can come after you personally to cover your partners\u2019 debts. This can create problems, which we will consider below.<\/span><\/p>\n<\/div>\n

    Creating a Partnership<\/span><\/h3>\n

    Partnerships arise automatically in certain circumstances. But this does not mean you cannot set out the terms of the partnership. In fact, it would be highly prudent to do just this. This is the basis of the partnership agreement, which is a formal declaration of the rights and obligations the partners owe one another.\u00a0<\/span><\/p>\n

    If there is no partnership agreement, disputes between partners become more complicated. Notably, the law will imply specific terms from the 1890 Act as if that was the agreement each partner consented to. Invariably, because the act is 130 years old, this can produce some problems (like requiring the consent of every partner to expel a partner, including the partner every other partner wants to get rid of).<\/span><\/p>\n

    The Partnership Agreement<\/span><\/h3>\n

    Partnership agreements can be as long or as short as the partners wish. However, you should give thought to the following issues:<\/span><\/p>\n