What are the key features of a partnership?
The key features of a partnership are (subject to any variations set out in
a partnership agreement between the partners):
• Share of risk and rewards – all individuals share the
risks and rewards of the business.
• Share of profits – each partner is entitled to share the
net profits of the business. A contract need not provide for equal shares.
It may depend upon how much the partner has invested.
• Liability, without limit – partners are jointly and
severally responsible for all the debts and obligations of the business
without any limit, including loss and damages arising from wrongful acts or
omissions of their fellow partners and potential liability to third
• Decision making – partners have the right to make the
decisions that affect the business or the business assets.
• Share of ownership – all individuals share the ownership
of the assets of the business, although they may have agreed that the firm
will use an asset which belongs to one of the partners individually.
• Flexibility – the partnership structure is flexible,
with complete freedom to agree how the business is managed and financed.
• Privacy – the financial and constitutional matters of
the partnership are entirely private. Disclosure is governed by the
• Taxation – as partners are deemed to be self-employed
there are no employer's NICs on partners' profits, and no mismatch between
corporation tax and tax credits on dividends. As a partner, you will be
responsible for your own tax and National Insurance and will therefore be
required to register with HMRC as soon as possible after starting a new
business. More information is available on HMRC’s website, which should be
consulted for the most up to date information on any tax issues.
• Membership Changes – no need for cumbersome arrangements
for shares to change hands without unavoidable tax consequences whenever
there is a change in membership.