Setting up a partnership company in the UK is often a good vehicle to enter where overseas individuals or entities are looking to create a light footprint by selecting an individual to represent their overseas based business. They could wish to ‘test the market’ of their product or service, by engaging a localised representative in the UK.

Setting up a partnership company in the UK can bring many advantages. Shared responsibility, ownership and ultimately profits. A partnership can be two or more individuals (or entities). Each partner is usually entitled to a percentage of the profits – depending on how much they have invested and what their percentage of a share is.

The partners are responsible for the debts incurred by the business.

Partnerships carry a certain proportion of risk – as they are personally liable regarding creditors, although this can be mitigated with the appropriate insurance policy, depending on the nature of the UK business.

The partners will also have a tax liability on the partnerships profits.

A partnership, in particular if one member is located in a different operating country than the remaining partners could disagree and the partnership could fall out.

As with any UK legal entity, there are advantages and disadvantages to a partnership.

  • Mutual support by fellow partners – including sharing of responsibilities, duties and tax liability.
  • Flexibility – a partnership could be easier to form, manage and run. Depending on the nature of the partnership, there could be less regulatory requirements involved.
  • Access to multi-disciplined skills – one partner may have a strong legal and financial background, whereas another may be more IT skilled.
  • Access to fellow partners allow for idea sharing, problem solving and an opportunity to execute a task more successfully.
  • More partners involved mean more individuals to “sign-off” action points.
  • Decision making can be slower – requiring multiple agreement(s).
  • General partnerships are subject to unlimited liability status – meaning each parner shares responsibility and risk.
  • Differences of personal aims – and firm-wide objectives.
  • Potential resentment when recognition is not appropriately given.
  • Under UK legislation, the partners submit their tax information by way of their personal tax return (Self Assessment). Each partner is required to register with HMRC as self-employed.

There are other alternatives to a partnership company in the UK – such as a Limited Company Registration. The shareholding of this could be owned partly by an overseas based entity, and an individual in the UK (or other jurisdiction).