Q&A - What is a partnership?

A partnership is formed where a business is started and owned by more than one person.

In each case, a legal document called a Partnership Agreement sets out how the partnership is run, covering areas such as:

• How profits are to be shared
• What the partners have to invest into the business
• How decisions are taken
• What happens if a partner wants to leave or dies

The partners between them own all the business assets and owe all business liabilities. Partners, therefore, also have unlimited liability.

However, there is now a fairly new form of partnership in which the partnership is treated as a separate legal entity with its own assets and liabilities. This is known as the limited liability partnership (“LLP”).

Like a company, the LLP is registered at Companies House and must file accounts. The partners continue to control and own the business – but the crucial different is that they are protected by limited liability.