Introduction to Partnerships and Partnership Taxation: overview of types of partnership
A general partnership is governed by the Partnership Act 1890. All partners of a general partnership are general partners and bear joint liability without limits for debts of the partnership.
A Limited Partnership (LP) is regulated by the Limited Partnership Act 1907 and must be registered at Companies House. As an overview, a Limited Partnership is one in which at least one of the partners restricts their liability for the debts and obligations of the firm to a pre-determined sum; such partners are known as the limited partners. A Limited Partnership must have at least one general partner who manages the business and bears unlimited liability to creditors. Limited partners must not take part in the management of the partnership business in order to preserve their limited liability. Limited Partnerships are discussed in more detail at PM50100 onwards.
A Limited Liability Partnership (LLP) is governed by the Limited Liability Partnership Act 2000. It must be registered at Companies House and have at least two designated members who have specific additional duties in respect of Companies House requirements, such as the filing of partnership accounts, charges and so on. In law, an LLP is a body corporate and has many similarities as a business structure to a limited company, whilst still providing the organisational flexibility offered by the partnership model. Members of an LLP have limited liability for the partnership debts to the extent of their capital contributions and, unlike limited partners of an LP, they are free to take part in management of the business. However, LLPs which are carrying on a trade or business are subject to the tax rules for partnerships rather than companies. Detailed guidance regarding LLPs is available at PM50400 onwards.