An Ultimate Guide for Registering Partnership Company in the UK
Updated: Apr 28
A partnership company in the UK is a type of business structure where two or more individuals operate as co-owners and share profits and losses. In a partnership, each partner is personally liable for the debts and obligations of the business, meaning that their personal assets can be used to pay off any outstanding debts if the business cannot. In the UK, there are three types of partnership companies: general partnership, limited partnership, and limited liability partnership. Each type has its own set of rules and regulations regarding the liability of partners, management of the business, and financial reporting.
How Does a Partnership Business Work?
A partnership is a type of business structure in the UK where two or more people come together to carry on a business for profit. The partnership can be formed informally by a verbal agreement, but it is recommended to have a written partnership agreement to clarify the terms and conditions of the partnership. Here are some key aspects of how a partnership business works in the UK:
Formation: A partnership can be formed by registering with HM Revenue & Customs (HMRC) for tax purposes. However, registering a partnership is not a legal requirement in the UK. A partnership agreement can be made between the partners to specify how the business will be run.
Liability: Partnerships are not considered separate legal entities from their owners, so the partners are personally liable for the debts and obligations of the partnership. Each partner's liability is unlimited, which means they are jointly and severally liable for the debts of the partnership.
Management: Partners share the management of the business and have equal rights to make decisions. However, the partnership agreement can specify how the management will be structured and how decisions will be made.
Profit-Sharing: Partners share the profits of the business according to the terms of the partnership agreement. The agreement may specify a percentage of profits for each partner or may provide for equal distribution of profits.
Taxation: A partnership is not taxed as a separate entity. Instead, each partner pays tax on their share of the partnership profits. Partnerships must file an annual partnership tax return and provide each partner with a statement of their share of the profits.
Termination: A partnership can be dissolved by mutual agreement, by the death or bankruptcy of a partner, or by court order. The partnership agreement should specify the conditions for termination and how the assets and liabilities of the partnership will be distributed.
Overall, a partnership business in the UK can offer many advantages, such as shared management and risk, but it is important to have a clear partnership agreement and understand the legal and tax implications of this type of business structure.
Do Partnerships Have to Register with Companies House UK?
In the UK, certain types of partnerships are required by law to register with Companies House. This includes Limited Liability Partnerships (LLPs), which must be registered with Companies House under the Limited Liability Partnerships Act 2000.
However, other types of partnerships such as general partnerships and limited partnerships are not required to register with Companies House.
That being said, even if a partnership is not required to register with Companies House, they may still choose to do so voluntarily. Registering with Companies House can provide certain benefits such as increased transparency, protection of the partnership name, and access to certain business banking and financial services.
It is recommended that partnerships seek professional advice to determine whether they are required to register with Companies House and to weigh the pros and cons of voluntary registration.
What Are the Legal Requirements for A Partnership Business UK?
In the UK, a partnership is a type of business structure where two or more people come together to carry on a business with the goal of making a profit. There are two main types of partnership structures: General Partnerships and Limited Liability Partnerships (LLPs). The legal requirements differ slightly for each type.
Choose a name: Partnerships must choose a business name that is not misleading or offensive. It also cannot be too similar to an existing company or trademark.
Register with HM Revenue & Customs (HMRC): All partnerships must register with HMRC for tax purposes. This involves providing information about the partnership and each partner's personal information.
Create a Partnership Agreement: While not legally required, it is strongly recommended to have a written partnership agreement. This agreement outlines each partner's rights, responsibilities, and shares of profits and losses. It can help prevent disputes in the future.
Taxes: Partnerships are not taxed as a separate entity. Instead, each partner must report their share of the partnership's profits or losses on their personal tax return and pay any tax due. Partners are also responsible for their own National Insurance contributions.
Limited Liability Partnership (LLP):
Choose a Name: Similar to a general partnership, LLPs must choose a business name that is not misleading or offensive and does not conflict with existing companies or trademarks.
Register with Companies House: LLPs must register with Companies House and provide the required information, including the names and addresses of the partners (also called members), the registered office address, and a statement of compliance.
LLP Agreement: While not legally required, it is strongly recommended to have a written LLP agreement outlining the rights and responsibilities of each partner.
Annual Requirements: LLPs must file annual accounts with Companies House and an annual confirmation statement to keep their information up to date.
Taxes: LLPs are taxed similarly to general partnerships, with each partner reporting their share of profits or losses on their personal tax return. Additionally, LLPs must register for VAT if their annual taxable turnover exceeds the VAT threshold.
These are general guidelines for the legal requirements of partnership businesses in the UK. Keep in mind that regulations may change, and it is essential to consult with a legal professional to ensure your partnership is set up and maintained in compliance with current laws.
Benefits of Registering a Partnership Company in the UK
Flexibility: Partnership companies in the UK offer flexibility in terms of management and decision-making. Partners can agree on a division of labour and delegate responsibilities based on their individual strengths and preferences.
Cost-effective: Registering a partnership company in the UK is generally less expensive compared to incorporating a limited company. There are fewer legal and administrative requirements, which can reduce start-up costs.
Tax Benefits: Partners can share profits and losses, which can allow for more favourable tax arrangements.
Personal Liability: While each partner is personally liable for the debts and obligations of the business, registering a partnership can offer some level of protection for the partners' personal assets.
Pooled Resources: By pooling resources and expertise, partners can more easily achieve their business goals and overcome challenges.
Shared Decision-Making: Registered partnership companies allow partners to make important business decisions collectively, which can lead to better decision-making and more efficient problem-solving.
Established Brand: Registering a partnership company can help establish the brand and credibility of the business, making it easier to attract customers, suppliers, and investors.
The Disadvantages of Registering a Partnership Business
The disadvantages of registering a partnership business in the UK include:
Cost: The cost of registering a partnership business in the UK, including fees and legal expenses, can be substantial, which can be a barrier for some entrepreneurs.
Complexity: The process of registering a partnership business can be complex, especially if the partnership is large or complex, and may require the assistance of a lawyer or accountant.
Limited Liability: Unlike limited companies, partners in a partnership business have unlimited liability, which means they are personally responsible for the debts and obligations of the partnership.
Reduced Flexibility: A partnership business may have reduced flexibility compared to a limited company, as changes to the partnership agreement, such as the addition or removal of partners, may require the agreement of all partners.
Potential Conflicts: Partnerships can be prone to conflicts, as partners may have different views on the direction of the business or the allocation of profits.
Less Protection: A partnership business provides less protection to partners compared to a limited company, as partners are personally liable for the debts and obligations of the partnership.
Legal Requirements: There are a number of legal requirements associated with registering a partnership business in the UK, including the need to register with Companies House and to comply with tax and accounting requirements. Failure to comply with these requirements can result in fines or penalties.
Despite these disadvantages, many entrepreneurs still choose to register a partnership business in the UK due to the relatively low cost and simplicity of setting up and running a partnership, as well as the close working relationship between partners.
Requirements for Registering A Partnership Company
To register a partnership company in the UK, the following eligibility criteria must be met:
Age: Partners must be at least 16 years old.
Residency: One of the partners must be a UK resident.
Business Activities: The partnership must be engaged in lawful business activities.
Partners: There must be at least two partners. There is no maximum limit to the number of partners.
Business Name: The chosen business name must not be identical or too similar to an existing name, and must not contain any restricted or prohibited words or expressions.
Registered Address: The partnership must have a registered address in the UK where official correspondence can be sent.
Partnership Agreement: The partners must draft a partnership agreement, which outlines the terms and conditions of the partnership and sets out the responsibilities of each partner.
UTR Number: A unique taxpayer reference (UTR) number issued by HM Revenue & Customs (HMRC).
VAT Registration: If the partnership's annual taxable turnover exceeds the VAT threshold, a VAT registration number must be obtained.
Identification: Each partner may need to provide proof of identity and address, such as a passport or driver's license.
Business Name Availability Check
To check the availability of a business name in the UK, follow these steps:
Visit the Companies House website: Go to the Companies House website (https://www.gov.uk/government/organisations/companies-house) and click on the ‘Check company name availability’ link.
Enter the Proposed Name: Type in the proposed name of the partnership.
Search: Click the ‘Search’ button to initiate the search.
Review the Results: The results of the search will show if the name is available, or if it is already in use or too similar to an existing name.
Consider Alternative Names: If the proposed name is not available, consider alternative names that are unique and not too similar to existing names.
It is important to choose a unique and distinguishable business name, as this will help the partnership establish its brand and identity. The business name must not be identical or too similar to an existing name, and must not contain any restricted or prohibited words or expressions.
Where to Register a Partnership Company in the UK
A partnership company in the UK can be registered with Companies House, which is the government agency responsible for registering and regulating limited companies in the UK. The registration process can be done online or by post. The following steps should be followed:
Gather Information: Assemble all the required information, including the business name, registered address, partner details, nature of business, and partnership agreement.
Choose a Method of Registration: The registration process can be done online or by post. The online process is faster and more convenient, while the postal process may take longer.
Submit the Application: Submit the completed application form, along with the required information and fees, to Companies House. If you plan to register a limited company, then you need to fill up form LP5.
Receive Confirmation: After the registration is complete, Companies House will issue a certificate of incorporation, which serves as proof of the partnership's existence.
It is important to keep Companies House informed of any changes to the partnership's information, such as changes in partner details, registered address, and business activities. Failure to do so may result in fines or penalties.
Use the SA400 form to check in an organization partnership for Self-Assessment, or sign in for it online. Registration of your partnership in HMRC is important, to permit the accomplice named (selected from the partners) to publish Self-Assessment tax returns. This ensures that the commercial corporation partnership is capable of pay any tax they owe.
How is a Partnership Taxed UK?
In the UK, a partnership itself is not taxed as a separate entity. Instead, the profits and losses of the partnership are allocated to the individual partners, who are then taxed based on their respective shares. Here's an overview of the tax treatment for partners in a partnership:
Income Tax: Each partner is required to report their share of the partnership's profits or losses on their personal Self-Assessment tax return. The income from the partnership will be combined with any other income the partner has, and income tax will be calculated based on their total income. The UK has different income tax bands and rates depending on the amount of income, and partners will be taxed accordingly.
National Insurance Contributions (NICs): Partners in a partnership are considered self-employed for NIC purposes. They are responsible for paying Class 2 and Class 4 National Insurance contributions. Class 2 NICs are a fixed weekly amount, while Class 4 NICs are calculated as a percentage of the partner's taxable profits.
Value Added Tax (VAT): If the partnership's annual taxable turnover exceeds the VAT threshold, this threshold is £85,000, but it may change), the partnership must register for VAT with HM Revenue & Customs (HMRC). The partnership will then be responsible for charging VAT on its sales and services, as well as reclaiming VAT on its purchases. The partnership will need to submit VAT returns to HMRC and pay any VAT due.
Record Keeping: Partners are responsible for keeping accurate records of the partnership's income and expenses. These records must be retained for at least five years from the submission deadline of the relevant tax year.
Different Forms the Partners May Need to File Self-Assessment Tax
Use the SA401 to test in as a partner for Self-Assessment and Class 2 National Insurance contributions. It includes questions that help HMRC to determine your tax returns and Class 2 NICs' necessities. The partners must be part of up one at a time for the form SA400. Registering a partnership for Self-Assessment partners who aren’t human beings, for instance, groups, Limited Liability Partnerships (LLPs), and trusts should completely form SA402. Each companion has to sign a wholly separate shape SA401 or SA402, as suitable. This applies even supposing the partners have already dispatched in tax returns and are registered for Self-Assessment in their very own right.
Use the SA402 to register a companion (accomplice) who isn't someone (like an individual) for Self-Assessment. The dependable associate, for instance, a trustee or an agency secretary, ought to sign this shape. Each commercial corporation partnership needs to nominate a companion who takes responsibility for completing and filing information to HMRC on time. It’s their responsibility to apply thru on-line form SA402 or to check in their partnership in every other/second partnership.
Getting Help From an Accounting Firm - How Much Will They Charge?
The cost of registering a new business in the UK varies and depends on the specific services required and the size of the business. On average, an accounting firm may charge anywhere from £500 to £2,000 or more for business registration services, including assistance with company formation, registering for taxes, and obtaining necessary licenses and permits. It's recommended to get quotes from several accounting firms to compare prices and services offered.
Maintaining Company Records
To maintain accurate and up-to-date company records for a partnership company in the UK, the following steps should be taken:
Partnership Agreement: A written partnership agreement should be in place, outlining the terms and conditions of the partnership and the responsibilities of each partner. This agreement should be reviewed and updated as necessary.
Accounts: The partnership must keep accurate records of its financial transactions, including income and expenses, sales and purchases, and bank statements.
Annual Accounts: The partnership must prepare and file annual accounts with Companies House, which must include a balance sheet, profit and loss account, and notes to the accounts.
Corporation Tax: The partnership must file a Corporation Tax return with HM Revenue & Customs (HMRC) each year, and pay any Corporation Tax due.
Self-Assessment: Each partner must file a Self Assessment tax return with HMRC each year, declaring their share of the partnership's profits and any other income.
Business Address: The partnership's registered address must be kept up-to-date with Companies House.
Change of Partners: If there are changes in the partnership, such as the addition or removal of partners, this must be reported to the Companies House.
It is important to keep accurate and up-to-date records, as this will help the partnership comply with legal and tax requirements and make it easier to manage the business effectively.
Filing Annual Returns
To file annual tax returns for a partnership business in the UK, the following steps should be taken:
Register for Self Assessment: Each partner must register for Self Assessment with HM Revenue & Customs (HMRC), unless they are already registered.
Collect Financial Information: Collect all relevant financial information, including partnership accounts, bank statements, and invoices, and prepare a record of income and expenses for the tax year.
Calculate Tax Liability: Use the financial information to calculate the partnership's tax liability for the tax year, including Corporation Tax and Self Assessment tax.
File a Corporation Tax Return: File a Corporation Tax return with HMRC, which must be done within 12 months of the end of the partnership's financial year.
File Self-Assessment Tax Returns: Each partner must file a Self Assessment tax return with HMRC, which must be done by the end of January following the end of the tax year.
Pay Tax Due: Pay any tax due on or before the due date.
It is important to file accurate and complete tax returns, and to pay any tax due on time, to avoid fines or penalties. HMRC may carry out checks or audits to ensure compliance, and it is important to keep accurate and up-to-date records to support any claims or deductions.
Registering Changes to the Partnership
To register changes to partnership business in the UK, the following steps should be taken:
Determine the Changes: Identify the changes that need to be registered with Companies House, such as changes in partner details, registered address, and business activities.
Choose a Method Of Registration: The registration process can be done online or by post. The online process is faster and more convenient, while the postal process may take longer.
Submit the Appropriate Forms: Submit the appropriate forms to Companies House, along with the required information and fees. For example, if there is a change in partner details, the form LL LP 5 should be submitted.
Receive Confirmation: After the changes have been registered, Companies House will issue a confirmation of the changes.
It is important to keep Companies House informed of any changes to the partnership's information, as failure to do so may result in fines or penalties. It is also important to keep accurate and up-to-date records to ensure compliance with legal and tax requirements.
Why Is It a Good Idea to Get Professional Help to Form a Partnership Business UK?
Getting professional help when forming a partnership business in the UK can be highly beneficial for several reasons:
Legal Expertise: Professionals such as solicitors or business advisors have the necessary legal knowledge and experience to ensure that your partnership is set up in compliance with UK laws and regulations.
Partnership Agreement: While not legally required, having a well-drafted partnership agreement is strongly recommended to outline each partner's rights, responsibilities, and profit/loss shares. A professional can help you create a comprehensive agreement that addresses potential issues and minimizes the risk of future disputes.
Tax Advice: Tax regulations can be complex, and professionals can provide guidance on the most tax-efficient structure for your partnership, as well as ensure that you are aware of your tax obligations and registration requirements.
Protecting Your Interests: Professionals can advise on ways to protect your interests and assets, such as the possibility of forming a Limited Liability Partnership (LLP) to limit your personal liability.
Regulatory Compliance: A professional can help you navigate the various registration requirements and ensure that your partnership is compliant with all necessary regulations, such as registering with Companies House (for LLPs) or HM Revenue & Customs (for tax purposes).
Time and Effort: Setting up a partnership can be time-consuming, and having professional assistance can save you time and effort by streamlining the process and ensuring that all necessary steps are taken.
Ongoing Support: Professionals can provide ongoing advice and support as your partnership grows and develops, helping you navigate changes in laws, regulations, and industry practices.
In summary, getting professional help to form a partnership business in the UK can save you time and effort, ensure legal compliance, protect your interests, and provide valuable advice on various aspects of your partnership, including tax planning and dispute resolution. This can ultimately contribute to the long-term success of your partnership business.
Whether or not it is a good idea to register a partnership business in the UK depends on the individual circumstances and goals of the partners. On one hand, partnerships offer a number of advantages, such as simplicity, low cost, and close working relationships between partners. In addition, partnerships offer tax benefits and allow partners to share profits and decision-making responsibilities.
On the other hand, partnerships also have a number of disadvantages, such as unlimited liability, potential conflicts between partners, and reduced flexibility compared to limited companies. Ultimately, whether or not it is a good idea to register a partnership business in the UK depends on the specific needs and goals of the partners, as well as the size and complexity of the business. It may be a good idea to seek the advice of a lawyer or accountant before making a decision on the best structure for the business.