Legal status

What are a partnership's legal obligations?

A partnership arrangement has a number of legal obligations, including:

  • Tax - unless otherwise agreed in a deed of partnership, partners are assessed for income tax according to their personal income. As each partner is responsible for their own tax they must complete an annual self-assessment form. The partnership may also be liable for VAT if the turnover exceeds the current limit.
  • National Insurance contributions - partners are liable for Class 2 and Class 4 National Insurance contributions.
  • Accounts - a partnership does not need to produce audited accounts but it should keep adequate accounting records and produce a profit and loss account and balance sheet.
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