Types of partnership

You, along with the other partners in the partnership, will be acting as agents for each other and you will be individually responsible for your and their actions as well as being responsible collectively as a partnership. As a partner you must: act honestly and in the best interests of the partnership; and you must tell the other partners about any benefit you have derived from the partnership without the consent of the other partners.

You can share all profits between the partners and each partner will pay tax on his share of the profits.

Equally, you’re personally responsible for your share of: any losses your business makes; bills for things you buy for your business, like stock or equipment.

If you become a member of a limited liability partnership (LLP), that partnership is considered to be a corporate body which exists as a legal ‘person’ independently of its members.

The partners in an LLP aren’t personally liable for debts the business can’t pay. Their liability is limited to the amount of money they invest in the business.

LLPs are most often set up by professional services firms, like solicitors or accountants.

If you want to set up a limited partnership you must register it as a limited partnership. A limited partnership consists of ‘general partners’ and ‘limited partners’.

The liability for debts that can’t be paid in a limited partnerships is unequally shared by its partners. This means: ‘general partners’ can be personally liable for all the partnerships' debts; ‘limited partners’ are only liable up to the amount they initially invest in the business.

For more information on how to set up and run these sorts of partnerships, read Setting up a partnership and Running a partnership.