In a partnership, two or more people share the risks, costs, and responsibilities of being in business. Each partner is self-employed and
takes a share of the profits. Usually, each partner shares in the decision-making and is personally responsible for any debts that the
business runs up.
Unlike a limited company, a partnership has no legal existence distinct from the partners themselves. If one of the partners resigns, dies
or goes bankrupt, the partnership must be dissolved.
A partnership is a relatively simple and flexible way for two or more people to own and run a business together. However, partners do not
enjoy any protection if the business fails.
Set-up
Each partner needs to download form CWF1 to register as self-employed from the HM Revenue & Customs website (PDF).
It's a good idea to draw up a written agreement between the partners. For further advice, consult an accountant or solicitor.
Management and raising finance
Partners themselves usually manage the business, though they can delegate responsibilities to employees.
Partners raise money for the business out of their own assets, and/or with loans. It's possible to have 'sleeping' partners who contribute
money to the business but are not involved in running it.
Records and accounts
The partnership itself and each individual partner must make annual self-assessment returns to HM Revenue & Customs.
The partnership must keep records showing business income and expenses.
Profits
Each partner takes a share of the profits.
Tax and National Insurance
As partners are self-employed, they are taxed on their share of the profits. Each partner needs to pay fixed-rate Class 2 National Insurance
contributions (NICs) and Class 4 NICs on their share of the profits.
Liability
Each partner is personally responsible for all debts run up by the partnership as a whole. This means their homes or other assets may be at
risk if the business fails.
