What types of partnership are there? What are the differences? 

This is a freeview 'At a glance' introduction to partnerships. 

At a glance

  • A partnership exists when two or more persons commence in business together with a view to making a profit. See When does a partnership exist?
  • A partnership must be run on a commercial basis.
  • A business is defined as a trade, occupation or profession.
  • There are three types of partnership in the UK, each defined by a different partnership act.
    • A conventional partnership is not a separate legal entity from its owners. It is unable to hold land and property in its name therefore its partners may hold that in trust.
    • A Limited Partnership (LP) is a partnership governed by the 1907 Limited Partnership Act. It is not to be confused with a Limited Liability Partnership (LLP).
    • An LLP is a corporate version of a partnership. It is usually taxed transparently but it may hold land and property in its name. Partners in an LLP are known as members.

Partnerships are transparent for tax purposes. This means that each individual is taxed as an individual, as opposed to the partnership being taxed as a body distinct from its owners.

Certain groups are unable to form partnerships and these include:

  • Charities.
  • Not-for-profit organisations.

When a company is a partner in a partnership it is taxed on its profits according to Corporation Tax rules.


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