Partnership (UK)

United Kingdom partnership law concerns the way that partnerships are formed or governed within the United Kingdom. Depending upon where the partnership was formed, English law or Scots law may apply in addition to statutes that create a framework across the UK. Under Scots Law a partnership is a distinct legal entity and can borrow money from a bank in the name of the partnership, while English law only allows borrowing in the names of individual partners. Partnerships are a form of business association, which arises automatically when people carry on business with a view to a profit. (Partnership Act 1890 s 1). Partners are jointly and severally liable, just as they own the property in common. A limited partnership, under the Limited Partnerships Act 1907 may have sleeping partners, who if they do not partake in any business management will not be liable beyond their investments (s 6). A ‘partnership’ under the Limited Liability Partnerships Act 2000 is now considered a separate legal person (s 11) with limited liability (ss 1 and 14), though it is treated as a partnership for tax, and is not subject to so much regulation as would be a company. There must, however, be at least two partners.

Partnerships were a common law phenomenon, dating back to the Roman law institution of a societas universorum quae ex quaestu veniunt, or a trade partnership.

Section one of the 1890 Act defines partnership as ‘the relationship which subsists between persons carrying on a business in common with a view of profit.’ This can come about by oral agreement, written document or conduct. The minimum membership is two and the maximum since 2002 is unlimited. The provisions of the Partnership Act 1890 apply unless expressly or impliedly excluded by agreement of the partners. Each partner is entitled to participate in management, get an equal share of profit, an indemnity in respect of liabilities assumed in the course of business and the right to not be expelled by other partners. A partnership ends on the death of a partner. A partner is jointly and severally liable for others debts; there is no limited liability.

Only sleeping partners may have limited liability, and it must consist of at least one general partner and one limited partner.

Under the 2000 Act, such partnerships are deemed to have legal personality. It allows limited liability for general trading debts, but individual partners cannot limit personal liability for negligence. It was introduced to allow some protection against large negligence actions, where the risks were felt to be excessive.

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