In a partnership, you and your partner (or partners) personally share responsibility for your business.
Partners share the business’s profits, and each partner pays tax on their share.
However, you should be aware that each partner in a partnership is personally liable for any losses and any debts of the partnership. There is no limited liability.
If the business risks are low then this can be an effective way to start off a business and ensure that partners are committed to the business. However, if the business fails it can mean real personal and financial difficulties for the individual partners involved.
There are some businesses required by law or the rules of a professional body or association to be in the form of a partnership.
A partner in a partnership does not have to be an actual person. For example, a limited company counts as a ‘legal person’ and can also be a partner.
When you set up a partnership you need to register for Self-Assessment with HM Revenue and Customs (HMRC) and choose a ‘nominated partner’ who will be responsible for managing the partnership’s tax returns and keeping business records. The other partners need to register separately and send their own tax returns as individuals.