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Partnership

Corporate status

Unincorporated. (Note that the unincorporated partnership is a particular legal form but the word "partnership" is also used in a wider context. Thus one may come across an organisation called "XYZ Community Partnership" which is, in fact, a limited company and not structured as a partnership.)

Terminology: governing document

"Partnership deed" or "partnership agreement".

Terminology: governing body

"The Partners".

Management/governance structure

A single-tier structure, with no members other than the partners (who thus perform the dual roles of governing body and membership).

A partnership must exist for business purposes: it is a for-profit legal form.

Membership

The only members are the partners. Partners must be individuals or corporate bodies. The minimum number of partners is two and the maximum twenty.

As the partnership is a for-profit business structure, new partners are normally admitted by the existing partners.

Partners personally own all the assets of the partnership, and are personally liable for all its debts.

Governing legislation

Governed by the Partnership Act 1890.

Charitable status available?

No.

Profit-distribution permitted?

Not just permitted, but necessary - profit distribution is a defining feature of a partnership.

Examples of use

A partnership is never likely to be a primary-level organisation in the voluntary and community sectors because of its requirement to exist "for business purposes" and to distribute profits to the partners. However a partnership may be formed by a number of voluntary or community organisations to generate trading income: for example, a group of charities might form a partnership to produce and sell Christmas cards, distributing the profits amongst the participating charities.

In the social enterprise sector, small worker co‑operatives are sometimes structured as partnerships. This has the advantage of being cheap and easy to establish, and the partners are taxed as self-employed rather than as employees on PAYE. However, they are not protected by limited liability and the partnership structure has a few other inherent disadvantages, so this legal form is usually only adopted as a temporary measure to test the feasibility of the business idea. If viable, the co‑operative will usually then go on to incorporate either as a company or as an industrial and provident society or as a limited liability partnership.

Participation issues

As the partnership structure does not feature a participating membership, it is unlikely to suit an organisation that wishes to encourage participation in its own affairs and governance. It may be used as a starting point for small co‑operative ventures.

As partnerships are for-profit businesses, the form is never likely to be of much use in promoting participative methodologies.

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