A partnership exists where two or more persons are trading together with a view to profit. As with sole tradership it is a form of self-employment.
Operating as a partnership is a little more formal than operating as a sole trader as there is an agreement in place between the partners. The agreement may be verbal, written or implied and will cover things such as the profit sharing arrangements, capital commitments and management of the partnership. Partners are answerable to each other but other than that, there is little or no more in regulation that a partnership has to consider. The position with regulation is similar to that applying to a sole tradership in that the means by which records are kept and the format of accounts is decided by the partners.
Partners can bind the partnership to a debt and all partners are then jointly and severally liable for that debt. There is, therefore, perhaps a greater risk for a partner in a partnership than there is for a sole trader in that whilst a sole trader is personally liable only for debts that he has created, a partner is also liable for debts created by his partners.
Partners pay Income Tax and National Insurance in the same way as sole traders but only on their own share of profits.