Company And Commercial Matters

Select an area... Overview Forming A Partnership

Forming A Partnership

A partnership is the relationship that exists "between persons carrying on a business in common with a view of profit". Business means "every trade, occupation or profession". Under English law a partnership is not a separate legal entity (unlike a company) and all of the partners have a direct legal liability for all obligations created in the name of the partnership.

As a general rule, a partner contributes a proportionate part of the capital together with his or her labour and services. A partner who only provides capital is called "a sleeping partner".

The wording of partnership agreements are not all the same since a lot will depend on the commercial terms that have been agreed between the partners in each case. The information that follows should, therefore, be regarded more as a non-exhaustive list of matters to be considered when forming a partnership agreement.

Two or more people wanting to carry on in business together generally have the choice between forming a partnership or carrying on that business through the means of a limited company. Certain professions are prohibited from acting through a limited company, notably solicitors (although there have been recent changes to the law in that regard) and doctors, but most others are free to choose.

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The articles on legal topics published in these pages are for interest only and are necessarily general in their terms. You should not act (or refrain from acting) on the basis of the information given without specific advice, as the principles and laws concerned may change, and their application will vary according to the particular circumstances.