01: Introduction

A partnership is the relationship between persons who carry on a business in common with a view to profit. In general, a partnership is not a separate legal entity in England and Wales, unlike a company. Partners are agents for one another in their business dealings. Each can be held liable for the actions of another and liability for partnership debts is usually unlimited, unless a limited liability partnership (LLP), which is recognised as a separate legal entity, is formed.

Usually it is clear whether people are in business in partnership, but where this is not the case the question as to whether a partnership exists must be determined based on the facts of the case. Common ownership of property is not enough to create a partnership. There must be a written or unwritten agreement between the parties to work together for profit.

A comprehensive, well-written agreement can reduce the possibility of disputes between partners – and prevention is definitely better than cure.

Individual partners are responsible for their own tax on their share of the business profits, but there are also a number of tax issues that the partnership must consider as a whole.Last Updated