Setting up and registering an ordinary (general) partnership
A partnership is the easiest way for two or more self-employed persons to start and run a joint business. It is also possible for companies (ltd) or limited liability partnerships (LLP) to establish a general partnership, although it seldom happens. Unlike a limited company (ltd), a general partnership is not a legal entity. It has no legal existence independent of its partners, who are jointly liable – also with their private assets – for all debts of their partnership.
Partners who are individuals must be registered as self-employed with HM Revenue and Customs before setting up a partnership with other self-employed persons or companies.
In the case of the insolvency of a partnership, creditors, including the Budget may pursue any of the partners for the entire debts of the partnership. If one of the partners leaves the partnership, the remaining partners are liable for the whole debt of the partnership.
There are only several requirements to meet in order to establish a partnership, in particular:
- Each individual who want to be a partner must be registered as self-employed before entering a partnership.
- Funds for the business are raised by its partners out of their assets or by taking out loans.
- A written partnership agreement (a deed of partnership) is not necessary, but advisable. A partnership agreement should stipulate partners’ responsibilities, rights, profit sharing and the terms on which the partnership can be terminated. Provisions of a partnership agreement are legally binding on partners.
- A newly established partnership can trade under the names of its members (partners) or it can choose its own business name. Choosing a trade name for your partnership, you have to follow specific rules. If the trading name of a partnership does not contain the partners’ name, they must be displayed on the partnership website and stationary, including letters and invoices. If a partnership has more than 20 partners, there is no need to list all their names.
- A newly established partnership must register with HM Revenue and Customs. You do not need to register an ordinary (general) partnership at Companies House.