A partnership is a business association where people join forces to develop mutual interests. It requires a partnership agreement – usually in writing, but if none exist, an oral agreement is sufficient in some countries. The agreement defines the expectation on each partner and how the profits are shared.
There are various form of partnerships, in particular:
- general partnership, with unlimited liability
- limited partnership, where some of the partners, called limited partners, have limited liability, while a least one partner, the general partner, is personally liable for debts and liabilities that the company faces
Since the year 2000, In the UK, there is also a business entity called ‘limited liability partnership’ which is a hybrid between a partnership and a corporation. All partners have limited liability and the company exists as a separate legal entity that has a continuing existence independently of its members; in relation to tax, however, a UK LLP is similar to a partnership: it is tax transparent or pass-through, that is to say it pays no UK tax but its members do in relation to the income or gains they receive through the LLP.