United Kingdom partnership law concerns the way that
partnerships
A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, business entity, businesses, interest-based organizations, schoo ...
are formed or governed within the United Kingdom. Depending upon where the partnership was formed,
English law
English law is the common law legal system of England and Wales, comprising mainly criminal law and civil law, each branch having its own courts and procedures.
Principal elements of English law
Although the common law has, historically, be ...
,
Scots law
Scots law () is the legal system of Scotland. It is a hybrid or mixed legal system containing civil law and common law elements, that traces its roots to a number of different historical sources. Together with English law and Northern Ireland l ...
or
Northern Irish 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
The Partnership Act 1890 (c. 39) is an Act of the Parliament of the United Kingdom which governs the rights and duties of people or corporate entities conducting business in partnership. A partnership is defined in the act as 'the relation which ...
s 1). Partners are jointly and severally liable, just as they own the property in common.
History
A
limited partnership
A limited partnership (LP) is a form of partnership similar to a general partnership except that while a general partnership must have at least two general partners (GPs), a limited partnership must have at least one GP and at least one limited ...
under the
Limited Partnerships Act 1907
A limited partnership (LP) is a form of partnership similar to a general partnership except that while a general partnership must have at least two general partners (GPs), a limited partnership must have at least one GP and at least one limited p ...
is similar to a partnership under the Partnership Act 1890, although there are two different types of partners: general partners, and limited partners.
[Limited Partnerships Act 1907, section 4(2)](_blank)
/ref> A general partner treated in the same way as a partner under the Partnership Act 1890, and is liable for the debt
Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...
s and obligations
An obligation is a course of action that someone is required to take, whether legal or moral. Obligations are constraints; they limit freedom. People who are under obligations may choose to freely act under obligations. Obligation exists when ther ...
of the firm. A limited partner, unlike a general partner, enjoys limited liability
Limited liability is a legal status in which a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a corporation, company or partnership. If a company that provides limited liability to it ...
, meaning that, provided they do not partake in any business management, they will not be liable for any debts or obligations beyond their investments. If a limited partner does partake in business management, they will be treated as if they were a general partner, and will be liable for the debts and obligations of the firm incurred under their management. A limited partnerships must be registered with Companies House
Companies House is the executive agency of the company registrars of the United Kingdom, falling under the remit of the Department for Business, Energy and Industrial Strategy. All forms of companies (as permitted by the Companies Act) are i ...
in order to be treated as a limited partnerships; if unregistered, it will be treated as a partnership.
A limited liability partnership
A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not ...
(LLP) under the Limited Liability Partnerships Act 2000
The Limited Liability Partnerships Act 2000 (c.12) is an Act of the Parliament of the United Kingdom which introduced the concept of the limited liability partnership into English and Scots law. It created an LLP as a body with legal personality ...
is legal person
In law, a legal person is any person or 'thing' (less ambiguously, any legal entity) that can do the things a human person is usually able to do in law – such as enter into contracts, sue and be sued, own property, and so on. The reason for ...
in its own right, and is distinct from the persons who own it (who are formally known as 'members', but often referred to as 'partners'). Generally, members enjoy limited liability, meaning they are not responsible for an LLP's debts or obligations. In order to be incorporated, a limited liability partnership must, ''inter alia'', have at least two members. Generally, the law governing partnerships within the meaning of the Partnership Act 1890 and the Limited Partnerships Act 1907 does not apply to limited liability partnerships. A notable exception to this, however, is in the respect of taxation
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal person, legal entity) by a governmental organization in order to fund government spending and various public expenditures (regiona ...
: LLPs are treated as partnerships for tax purposes.
In 2017, measures were introduced to make almost all UK companies identify their beneficial owners. This did not apply to partnerships in England, which resulted in an about a doubling of new partnership registrations, many presumably by owners who did not want such disclosure. A quarter of the 4,500 new partnerships in England from 2017 to 2021 were created by five UK-based agents.
Common law
Partnerships were a common law phenomenon, dating back to the Roman law
Roman law is the law, legal system of ancient Rome, including the legal developments spanning over a thousand years of jurisprudence, from the Twelve Tables (c. 449 BC), to the ''Corpus Juris Civilis'' (AD 529) ordered by Eastern Roman emperor J ...
institution of a ''societas universorum quae ex quaestu veniunt'', or a trade partnership.
*'' Waugh v Carver'' (1793) 126 ER 525, 2 HBI 235, held that receipt of profits of partnership made the recipient a partner. John George Phillimore
John George Phillimore (1808–1865) was an English barrister, known as a jurist and Liberal Party politician.
Life
The eldest son of Joseph Phillimore, he was born on 5 January 1808, and was educated at Westminster School. On 28 May 1824 he matr ...
later opined that this was 'one indeed of the most absurd decisions ever come to by a court of law'.
Partnership Act 1890
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 the debts of the others; there is no limited liability.
Limited Partnerships Act 1907
Only sleeping partner
A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments o ...
s may have limited liability, and it must consist of at least one general partner and one limited partner.
Limited Liability Partnerships Act 2000
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.
On 1 October 2008, section 1,286 of the Companies Act 2006
The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law.
The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largely ...
extended the Limited Liability Partnerships Act 2000 to Northern Ireland, and repealed the Limited Liability Partnerships Act (Northern Ireland) 2002
The Limited Liability Partnerships Act (Northern Ireland) 2002 is an Act of the Northern Ireland Assembly which introduced the concept of the limited liability partnership into Northern Irish law, passed two years after the Limited Liability Part ...
,Companies Act 2006, sections 1286(1)(a) and 1286(2)(a)
/ref> an act of the Northern Ireland Assembly
sco-ulster, Norlin Airlan Assemblie
, legislature = 7th Northern Ireland Assembly, Seventh Assembly
, coa_pic = File:NI_Assembly.svg
, coa_res = 250px
, house_type = Unicameralism, Unicameral
, hou ...
which prior to that date was the principal statute concerning LLPs in Northern Ireland.
See also
*United Kingdom company law
The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal ...
* Limited partnerships in England and Wales
*Limited Liability Partnerships Act 2000
The Limited Liability Partnerships Act 2000 (c.12) is an Act of the Parliament of the United Kingdom which introduced the concept of the limited liability partnership into English and Scots law. It created an LLP as a body with legal personality ...
*Limited Liability Partnerships Act (Northern Ireland) 2002
The Limited Liability Partnerships Act (Northern Ireland) 2002 is an Act of the Northern Ireland Assembly which introduced the concept of the limited liability partnership into Northern Irish law, passed two years after the Limited Liability Part ...
References
*JA McCahery and EPM Vermeulen, ‘Limited Partnership Reform in the United Kingdom: A Competitive, Venture Capital Oriented Business Form’ (2004) 5 European Business Organization Law Review 61
External links
*
UK legislation
*
{{DEFAULTSORT:United Kingdom Partnership Law
Law of the United Kingdom
English law