General Partnerships

General partnerships are common, easy to form, can be formed by accident – but can prove difficult to navigate.

A general partnership is formed when at least two people come together and carry on a business in common with the goal of making a profit. It isn’t necessary to make a profit, it’s just the intention to do so which matters. Partners owe each other a duty of good faith, which can significantly impact on what partners can do and how they may be required to account to other partners for their actions.

A general partnership can be formed without the partners even realising it. There is no need to register a general partnership at Companies House to form it. It is a matter of fact as to whether such a relationship exists, so disputes over whether a partnership actually exists can easily arise.

This kind of partnership is made up of its members (partners). It doesn’t have a separate legal identity like a company but is often referred to as ‘a firm’. Partners often have unlimited liability.

The rules regulating general partnerships date back to 1890 and can prove complex. The default position is that partners have equal shares of profits and any liabilities but that may not reflect the true nature of the commercial relationship between the partners or their capital investment. Also, it is generally very easy for a general partnership to be terminated by just one partner.

For these reasons, partners often draw up written agreements to determine how the general partnership should operate. These replace at least some of the general rules from 1890 and set out how the parties actually want to regulate the relationship.

We are experts on the rules and interpreting the written agreements that partners often enter into. We can cut through the complexity, to help you achieve the right result for your situation.