If more than one person is founding a business, and setting up a limited company is not suitable, starting a business partnership may be the best option. If you decide to set up a partnership, you and your partners will be responsible for running the business and the profits and losses will be shared between yourselves.
An alternative to a regular partnership is a limited liability partnership (LLP). This is a separate legal structure but, instead of shareholders and directors, it has 'members' who both own and manage the LLP. Generally, partners in an LLP are only personally responsible for the debts and losses of the partnership to the amount of their initial investment. LLPs are most commonly used for professional services firms (eg solicitors, architects and accountants). For further information, read Types of partnerships.
A further option is to set up a limited partnership. This consists of 'general partners' and 'limited partners'. General partners can be personally liable for all the debts in the partnership whereas limited partners are only liable up to the amount they initially invest in the business.
In Scotland, you could consider a Scottish general partnership. In this model, each partner acts as an agent and binds the partnership. However, every partner has unlimited liability to creditors for all the partnership debts.
You could also set up a Scottish limited partnership (Scottish LP). This is a unique vehicle available only in Scotland. Partners are taxed on their share of partnership income and gains according to their profit-sharing ratios. Scottish LPs are commonly used in private equity and property investment fund structures.
For further information, read What is a partnership.