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Partnership:

A partnership is like two or more sole traders joining forces to set up a business together. Partners, like sole traders, will be personally liable for the debts and liabilities of the partnership. In this case the liability is joint and several (other than liability for tax). It means a creditor could pursue all of the partners to recover a debt, or select an individual partner (probably the one with most personal wealth). The individual partner would then have to seek recompense from the other partners under the terms of the partnership agreement (or default statutory rules if one doesn’t exist).

Therefore, you should only go into partnership with people you trust. Of course you will also have to be able to work with them without spending your whole time in dispute. They should add something to the venture, probably beyond mere money. Often you will be better off paying interest to a lender than carrying a non productive partner.

On the positive side the partners will share all the profits in accordance with the partnership agreement (or statutory rules) and there is some spread of risk through the partners.

Compared to a sole trader, an extra layer of administration is added because partnership accounts will have to be drafted and approved to calculate and divide the profit (loss)
between the partners, in accordance with the partnership agreement. Each partner must then submit their own personal self-assessment tax return.

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