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Partners - United Kingdom

Updated 02/2011

Legal requirements

Types of collaboration

A business can be structured in various ways. Alternative business structures to that of a British registered company available to foreign investors in the UK, are:

  • partnership;
  • limited partnership;
  • limited liability partnership (LLP);
  • joint venture;
  • franchise;
  • European public limited company.

Partnership

In a partnership, two or more people share the risks, costs and responsibilities of the business. Each partner is self-employed and takes a share of the profits. Usually, each partner shares in the decision-making and is personally responsible for any debts that the business runs up. If one of the partners resigns, dies or goes bankrupt, the partnership may have to be dissolved.

Limited Partnership

A limited partnership consists of:

  • one or more persons called general partners, who are liable for all debts and obligations of the firm; and
  • one or more persons called limited partners, who contribute a sum or sums of money as capital, or property valued at a stated amount.

Limited partners are not liable for the debts and obligations of the firm beyond the amount contributed. They may not take part in the management of the business.

Limited Liability Partnership (LLP)

An LLP is similar to a general partnership; the difference is that personal liability of the members for business debt is reduced. It is limited to any personal guarantees they have given to raise finance.

Joint venture

An overseas company can form a base in the UK by joining with a UK company. Such joint ventures (JVs) are usually made with limited companies, or established as a partnership. Information on possible JV partners is available from the relevant UK trade association.

Franchise

Buying a franchise is a way of taking advantage of the success of an established business. The franchisee buys a licence to use the name, products, services and management support systems of the 'franchisor' company. This licence normally covers a particular geographical area and runs for a limited time, after which it should be renewable as long as the franchisee meets the terms of the franchise agreement.

A franchise business can take different legal forms. Most are sole traders, partnerships or limited companies. Whatever the structure, the franchisee's freedom to manage the business is limited by the terms of the franchise agreement.

European Public Limited Company

European Union legislation allows overseas companies to establish a European public limited company (also known as a "Societas Europaea" or "SE") in the UK. The major benefit of an SE is that the registered office can be transferred to another European country without a loss of legal status (avoiding, for example, the requirement to deregister the company in one country and reregister in another).

Other options for expanding your business are taking over an existing one, merging with another company or opening a branch in another EU country.

Administrative procedures

Registration

Each individual partner of an ordinary (or general) Partnership, a limited partnership or a limited liability partnership (LLP), must register as self-employed with HM Revenue and Customs (HMRC), which can be done online with form CW1.

A Limited Partnership must be registered under the Limited Partnership Act of 1907. To register, all partners must sign and submit Form LP5 (including details of the business name, nature of the business, commencement date and the sum contributed by each limited partner) to Companies House. There is a registration fee.

An overseas limited partnership cannot usually register in the UK because the main place of business of a limited partnership has to be in the UK.

Any new or existing firm of two or more "persons" (in law a "person" can be an individual or a company) can incorporate as an LLP. An LLP is incorporated by registration at Companies House following a similar process to that required for registering a company. An ‘Application to register a limited liability partnership’ – form LL IN01 must be completed and sent with the fee to Companies House.

LLPs have similar disclosure requirements to a company, including the filing of accounts. They are also required to file an annual return, and notify Companies House of any changes to the LLP's membership, any changes to members' names and residential addresses and any changes to the Registered Office address.

There are several ways of forming an SE:

  • merger;
  • as a holding company;
  • a subsidiary; or
  • by a plc transforming into an SE.

An SE may be created on registration in any one of the Member States of the European Economic Area (EEA). Member States are required to treat an SE as if it is a public limited company formed in accordance with the law of the Member State in which it has its registered office. UK national laws that apply to public limited companies also apply, in many respects, to SEs registered in the UK.

Resources

You can search for partners on Business Link's database which contains over 5 000 businesses and government contacts.

Check also the legislation on this topic in:

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Further help

Business Link is the main point of entry providing instant access to clear and  simple  information whether you are starting in business and need to find a partner, or whether you are an existing business wishing to expand.

The UK Trade & Investment is the government organisation that helps businesses, from hi-tech start-ups to global industry leaders, locate in the UK. It provides a wide range of information and business services.

The HMRC website has a special section on partnerships.

Assistance is also available from Scottish Enterprise's Business Gateway and Invest Northern Ireland.

The European Business Register (EBR) is a service covering 16 European countries - it provides reliable official data from each country's national trade register. Companies can use it to obtain details about their European partners.