Partnerships & LLP's
A partnership is a form of trading in which two or more people agree to carry on a business together. It is not registered at Companies House in the way that a limited company is. A partnership starts as soon as the partners begin trading - whether they have agreed a written partnership agreement or not!
Articles:
- Setting up a partnership (what you need to know to get started)
- The Pictons Director guide to: Partnership Agreements
- Exiting a partnership (the A-Z of what happens when things start to go wrong)
- The Pictons Director guide to: LLPs (including converting from a partnership)
Bite-Size Guide:
There are two key differences between a partnership and a company:
- Firstly, the partners have unlimited liability for the debts and losses of the partnership (no matter which partner incurred them). Whereas the owners (shareholders) of a limited company have limited liability, which extends only to the money that they agreed to put into the company in return for their shares.
- Secondly, a partnership and a company are taxed differently. A partnership is not a legal entity in its own right. It cannot sue or be sued. It trades through the partners - i.e. a debt owed by the partnership is owed by the partners as individuals and not by the partnership itself as a separate legal entity. Compare this to a limited company which can open a bank account in its own name and where the profits are 'owned' by the company itself (until they are distributed to the shareholders) and are subject to corporation tax.
In order to bridge the gap between these two forms of trading the government has in the recent past introduced a "limited liability partnership" vehicle. An "LLP" is a separate legal entity which needs to be registered at Companies House and gives the partners limited liability against debts and losses, but it is taxed in much the same way as a traditional partnership and is popular for professional practices and property investment firms.
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What to do next::
Need to know more? Read our articles to find out more about partnerships. If you don't already have a suitable partnership agreement it may be time to do something about it. Contact the Pictons Team to talk about solutions to your partnership / LLP questions