Setting Up or Altering a UK Partnership Business

Setting Up or Altering a UK Partnership Business

Legal and practical questions around UK partnership businesses.

By Carl Stanford

Does a business partnership have to be legally formalized?

The extent to which a UK business partnership needs to be legally formalized depends on the type of partnership.

For general partnerships, there’s no need to register with Companies House. All you have to do is register the partnership’s name and the names of its members with HMRC for tax purposes. It’s highly advisable, but not legally required, to draw up a partnership agreement between the partners, but this can be done without legal assistance. A general partnership isn’t a separate legal entity.

Limited partnerships and limited liability partnerships, however, do need to be formally registered with Companies House, just like other limited companies.

How do I bring a partner into my business?

If you’re currently a sole trader, you'll have to form a partnership to bring a partner into your business.

There are two forms of partnership. In an ordinary business partnership you simply need to register all partners with HMRC and nominate one of the partners to be responsible for managing the tax returns and accounts. You'll also need to draw up a partnership agreement, which should define how the business’ profits and losses will be divided. In this case, the partners control and manage the business themselves.

Alternatively, a limited liability partnership can be formed. As mentioned above, it needs to be registered with Companies House and its status means that partners are protected from liability for the company’s debts.

Can my lawyer business partner incorporate our company?

Yes. It’s perfectly acceptable for your business partner to undertake the incorporation process regardless of whether they’re a lawyer or not. They can use the Companies House Incorporation Service, file a paper application, or even act as a formation agent.

However, if the business is paying your partner a fee for their legal services, or is relying on their legal advice, there could be a conflict of interest. In this case, it might be worth drawing up a formal agreement about the terms of their legal advice and any potential redress.

Ideally, either your partner should act solely as a partner of the business and not give formal legal advice, or you should hire an independent lawyer.