Setting up as a Partnership
Ordinary' business partnerships
Legal responsibilities
You’re personally responsible for your share of:
A partner doesn’t have to be an actual person. For example, a limited company counts as a ‘legal person’, and can also be a partner in a partnership.
How to set up as a business partnership
The nominated partner must register the partnership with HM Revenue and Customs. When they do this, they will automatically register personally for Self Assessment.
Registration for other partners
You must register for Self Assessment to pay your personal tax and National Insurance on your share of the partnership’s profit as soon as possible after you start trading.
If you register the partnership or individual partners later than 5 October in your business’ second tax year, you could be charged a penalty.
Example
Partnerships’ tax responsibilities
The nominated partner must:
send a partnership Self Assessment tax return every year
All the partners must:
send a personal Self Assessment tax return every year
pay Income Tax on their share of the partnership’s profits
pay National Insurance
The partnership will also have to register for VAT if you expect its takings to be more than £81,000 a year.
Limited partnership and limited liability partnerships
Limited liability partnerships
The partners in a limited liability partnership aren’t personally liable for debts the business can’t pay. Their liability is limited to the amount of money they invest in the business.
Limited liability partnerships are most often set up by professional services firms, like solicitors or accountants.
The Companies House website has information about how to set up a Limited liability partnership.
Limited partnerships
The liability for debts that can’t be paid in a limited partnerships is unequally shared by its partners. This means:
‘general’ partners can be personally liable for all the partnerships’ debts
‘limited’ partners are only liable up to the amount they initially invest in the business
The Companies House website has information about how to set up a limited partnership.
Tax for limited liability and limited partnerships
Every year, the partnership must send a partnership Self Assessment tax return to HM Revenue and Customs (HMRC).
All the partners must:
send a personal Self Assessment tax return every year
pay Income Tax on their share of the partnership’s profits
pay National Insurance
You must also register the partnership for VAT if you expect your business’ takings to be more than £81,000 a year.
Read about setting up as a Sole Trader...
Read about setting up as a Limited Company...
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Ordinary' business partnerships
- In a business partnership, you and your business partner (or partners) personally share responsibility for your business.
- You can share all your business’ profits between the partners. Each partner pays tax on their share of the profits.
- Partnerships in Scotland (known as ‘firms’) are different, and have a ‘legal personality’ separate from the individual partners.
Legal responsibilities
You’re personally responsible for your share of:
- any losses your business makes
- bills for things you buy for your business, like stock or equipment
A partner doesn’t have to be an actual person. For example, a limited company counts as a ‘legal person’, and can also be a partner in a partnership.
How to set up as a business partnership
- You must choose a ‘nominated partner’. This is the partner who will be responsible for keeping business records and managing tax returns.
The nominated partner must register the partnership with HM Revenue and Customs. When they do this, they will automatically register personally for Self Assessment.
Registration for other partners
You must register for Self Assessment to pay your personal tax and National Insurance on your share of the partnership’s profit as soon as possible after you start trading.
If you register the partnership or individual partners later than 5 October in your business’ second tax year, you could be charged a penalty.
Example
- If you start a partnership or become a partner during tax year 2014 to 2015, you must register before 5 October 2015.
Partnerships’ tax responsibilities
The nominated partner must:
send a partnership Self Assessment tax return every year
All the partners must:
send a personal Self Assessment tax return every year
pay Income Tax on their share of the partnership’s profits
pay National Insurance
The partnership will also have to register for VAT if you expect its takings to be more than £81,000 a year.
Limited partnership and limited liability partnerships
Limited liability partnerships
The partners in a limited liability partnership aren’t personally liable for debts the business can’t pay. Their liability is limited to the amount of money they invest in the business.
Limited liability partnerships are most often set up by professional services firms, like solicitors or accountants.
The Companies House website has information about how to set up a Limited liability partnership.
Limited partnerships
The liability for debts that can’t be paid in a limited partnerships is unequally shared by its partners. This means:
‘general’ partners can be personally liable for all the partnerships’ debts
‘limited’ partners are only liable up to the amount they initially invest in the business
The Companies House website has information about how to set up a limited partnership.
Tax for limited liability and limited partnerships
Every year, the partnership must send a partnership Self Assessment tax return to HM Revenue and Customs (HMRC).
All the partners must:
send a personal Self Assessment tax return every year
pay Income Tax on their share of the partnership’s profits
pay National Insurance
You must also register the partnership for VAT if you expect your business’ takings to be more than £81,000 a year.
Read about setting up as a Sole Trader...
Read about setting up as a Limited Company...
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