A partnership is a relatively simple and flexible way for two or more people to own and run a profit-making business together. Social enterprises and other non-profit making organisations should not use this business structure.
Disputes between partners can cause difficulties, and the partnership may have to be dissolved if one of its members resigns or dies. It’s possible to resolve these issues in advance by drawing up a deed of partnership. It is a good idea for each partner to get legal advice before finalising their level of responsibility in a deed.
Limited Liability Partnership (LLP):
A LLP gives the benefits of Limited Liability in that it can protect your existing personal assets.
It has to be registered with Companies house, method is same as for Ltd Companies.
Difference between Partnerships & Limited Liability Partnerships:
Ltd liability partnership (LLP)
|ObligationYour obligations are same as for Sole Trader||ManagementThe business is controlled by its designated members|
|Liabilitiesyou are totally liable for any debts or legal compensation your business becomes liable for.||LiabilitiesThe LLP will be a separate legal entity and while the LLP itself will be liable for the full extent of its assets the liability of the members will be limited|
|ProsOften more money can be raised to start the business if mroe than one person is involved.||FinanceThe capital is provided by its members, LLP’s are similar to Partnership or Sole Trader in this respect|
|ConsAll personal assets of each partner are at risk if the business fails. Personal bankruptcy can occur.||ProfitsIncome derived by the members will be closer to that of a ‘Partnership’ than to the dividends paid by the Companies|