A partnership is a business entity owned by two or more persons who each invest money and/or other assets, and who work together with the aim of making a profit. The greater number of owners means that, in comparison with a sole trader, more finance becomes available – this is a common reason for forming a partnership. A partnership is also a means of sharing the risks and management of the business.
In the eyes of the law, the partners of a general partnership:
- are agents of the business, which allows the partners to manage the business and enter into contracts on behalf of the business
- have joint and several liability for the debts and torts of the business.
In the UK, there are three types of partnership: general partnership, limited partnership and limited liability partnership. As the number of partnerships is on the decline, this course will not go into the details of partnerships any further.