Partnership Contract UK: What You Need to Know Before You Agree

When you start a business with someone in the UK, a partnership contract, a legally binding agreement that defines how co-owners run a business, share profits, and handle disputes. Also known as a partnership agreement, it’s not optional—it’s your only protection if things go sideways. Without one, you’re stuck with the default rules from the Partnership Act 1890. That means profits split evenly, no one can be paid a salary, and any partner can force the business to dissolve—even if you’ve invested ten times more than they have.

Many people think a handshake and a shared bank account are enough. They’re not. A partnership agreement, a written document that outlines ownership stakes, decision-making power, and exit procedures for UK business partners covers what happens when someone quits, gets sick, or disagrees on strategy. It also defines how new partners are added, how debts are handled, and what happens if one partner steals from the business. These aren’t hypotheticals—they’re real risks. In 2023, over 1,200 UK partnerships dissolved due to unresolved conflicts, according to Companies House data. Most of those could’ve been avoided with a clear contract.

It’s not just about money. A good partnership contract, a legally enforceable document that sets out roles, responsibilities, and dispute resolution for UK business partners also clarifies who does what. Does your partner handle sales while you manage operations? That needs to be written down. What if one of you wants to sell your share? How is it valued? Who gets to say no? These aren’t just legal details—they’re the foundation of trust. Without them, even the strongest relationships crack under pressure.

You’ll also need to think about taxes. In the UK, partnerships don’t pay corporation tax. Instead, each partner files a personal tax return and pays income tax on their share. But if your contract doesn’t specify how profits are divided, HMRC will assume it’s equal—and that could cost you. A well-drafted contract can also include clauses for drawings, bonuses, or deferred payments, giving you real flexibility.

And don’t forget liability. In a general partnership, every partner is personally responsible for all business debts. If your partner signs a lease you didn’t approve, you’re on the hook. A contract can limit this by defining spending limits, requiring joint signatures, or even creating a limited liability structure—but only if you plan ahead. The UK doesn’t have a standard template. Every business is different. That’s why a one-size-fits-all agreement from the internet is dangerous.

What you’ll find in the posts below are real, practical guides from UK businesses that have been there. You’ll see how a tech startup in Manchester used a partnership contract to avoid a lawsuit when one founder left. How a London design firm structured profit-sharing to keep peace during slow seasons. How a Manchester café owner added an exit clause that saved their relationship after a disagreement over expansion. These aren’t theory pieces. They’re step-by-step breakdowns of what worked, what didn’t, and what you can copy.