A partnership consists of two or more sole traders who join forces to run a business. A partnership is not a separate legal entity and all liabilities of the business are split between the partners. One advantage of a partnership is that your annual profits can be split in different percentages each year. This can be useful if you’re looking for a structure where each partner can be rewarded according to the profit they generate for the business.
As well as submitting individual tax returns for each partner, you also need to prepare separate accounts for the partnership and submit them to HMRC. However, this still gives partners anonymity as no accounts have to be filed at Companies House (unlike an LLP or Limited Company).
It’s important to have a formal written agreement (partnership agreement) drawn up to state the role of each partner and to outline the way that the profits will be apportioned. Even if you’re going into partnership with your best friend - a partnership agreement will prevent any potential dispute if you have a disagreement further down the line.