Taking a share of the risks, costs and responsibilities
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, although the business can still continue.
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.
Each partner needs to register as self-employed employed.
It's a good idea to draw up a written agreement between the partners.
Partners themselves usually manage the business, though they can delegate responsibilities to employees.
It's possible to have 'sleeping' partners who contribute money to the business but are not involved in running it.
The partnership must keep records showing business income and expenses.
As partners are self-employed, they are taxed on their share of the profits.
Each partner also needs to pay Class 2 and 4 National Insurance contributions.
In England, Wales and Northern Ireland, partners are jointly liable for debts owed by the partnership and so are equally responsible for paying off the whole debt. They are not severally liable, which would mean each partner is responsible for paying off the entire debt. Partners in Scotland are both jointly and severally liable.
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