Glossary · UK
What is General Partnership?
A business structure where two or more people share ownership, profits and unlimited personal liability for the business's debts, without forming a separate company.
Full Definition
A general partnership (often simply called a "partnership") is a business run by two or more people (or companies) who share the responsibilities, profits and losses of the business, without creating a separate legal entity distinct from the partners themselves. Like a sole trader, each partner has unlimited personal liability for the debts of the business -- crucially, this liability is usually "joint and several", meaning each partner can be pursued for the whole of a partnership debt, not just their agreed share, if the other partners cannot pay. Partners are taxed individually on their share of the partnership's profits through Self Assessment, and each partner also pays Class 4 and (voluntarily) Class 2 National Insurance on their share of profits, in the same way as a sole trader; the partnership itself must also submit an annual partnership tax return showing how profits were divided. Most partnerships operate under a partnership agreement -- not a legal requirement, but strongly recommended -- setting out how profits and losses are split, decision-making rights, and what happens if a partner leaves, retires or dies; without one, the default rules in the Partnership Act 1890 apply, which are often unsuited to a modern business. Because of the unlimited and joint liability risk, many professional partnerships (solicitors, accountants) instead use a Limited Liability Partnership structure, which caps each partner's liability broadly to what they have invested in the business.