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Posted: Tue 8th Sep 2026
Business partnerships can be an exciting opportunity, but they also come with shared responsibilities, financial considerations and important decisions.
In this blog, we look at how partnerships work, what to agree on before you start, how to manage the relationship day-to-day, and the common mistakes to avoid.
We also cover when it's worth getting professional support, with practical guidance for London-based entrepreneurs looking to build a partnership that can grow with their business.
A business partnership is a structure where two or more people run a business together and share responsibility for its success.
In a general partnership, partners personally share responsibility for the business, including its debts and losses. Partners share the profits, and each pays tax on their share.
This is different from being a sole trader, where one person owns and runs the business. A limited company is different again because it is a separate legal entity from the people who own it.
If you're weighing up your options, Grow London Local's guide to choosing the right business structure is a useful starting point for comparing partnerships with sole traders, limited companies and limited liability partnerships.
For many small businesses, a partnership can be a straightforward way to combine expertise and resources.
You might have a great business idea but need someone with complementary skills, industry experience or access to a different network.
In a competitive city like London, having another perspective can be a real advantage.
However, you're not just sharing ideas and profits. You're also sharing decisions, responsibilities and risks, so it's important to understand the structure before you get started.
There are several important elements to consider when setting up a partnership.
Partners need to agree who is responsible for what. One person might manage sales and marketing while another looks after finance or operations.
Clearly dividing responsibilities can prevent confusion and make it easier to hold each other accountable.
Partners should agree how profits and losses will be shared.
This doesn't necessarily have to be an equal split, but it should be agreed in advance and recorded clearly.
Consider what each person brings to the business, including their time, investment, skills and resources. Having this conversation early can help avoid problems later.
How will you make important decisions? Will every partner have an equal say, or will certain decisions sit with the person responsible for a particular area?
Agree how everyday decisions will be made and how disagreements will be resolved.
Partners can have legal and financial responsibilities towards the business and each other, including responsibilities around tax, record-keeping and business debts.
There are different types of partnership, including general partnerships, limited partnerships and limited liability partnerships (LLPs), and the rules are different for each.
A partnership agreement sets out how the business will operate and what each partner has agreed to.
It can cover profit-sharing, responsibilities, decision-making and what happens if someone wants to leave.
Even if you're going into business with a close friend or family member, putting your agreement in writing is important.
It can also cover ownership changes, financial arrangements, dispute resolution and how the partnership can be brought to an end.
Choosing the right business partner is one of the most important decisions you'll make.
Look beyond whether you get along personally. Consider whether you have:
Complementary skills.
Similar ambitions.
Compatible approaches to money, risk and decision-making.
Discuss how much time each person expects to put into the business. If one partner plans to work full-time while another contributes a few hours a week, agree how this will affect responsibilities and profit-sharing.
Once you've chosen your partner or partners, define your roles clearly. Write down who will take responsibility for different areas and what happens when responsibilities overlap.
Next, agree how profits will be shared. Don't leave this conversation until the business starts making money. Agreeing the approach early can help prevent disagreements later.
You should then create a formal partnership agreement covering responsibilities, profit-sharing, decision-making and what happens if circumstances change.
Finally, make sure you understand the registration, tax and compliance requirements that apply to your partnership.
For a general partnership, you need to choose a name, choose a nominated partner and register with HM Revenue & Customs (HMRC).
The nominated partner is responsible for managing the partnership's tax returns and keeping business records.
GOV.UK has full guidance on setting up a business partnership, including information about registering with HMRC.
The nominated partner must register the partnership for Self Assessment, while the other partners need to register separately. HMRC also provides specific guidance on registering a partnership for Self Assessment.
If you're unsure about any of these requirements, an accountant, solicitor or business adviser can help.
A successful business partnership isn't just about having a good agreement. It also depends on how you work together day-to-day.
Set aside time for regular business and financial reviews. Look at your finances, progress against goals and any challenges that need attention.
Communication is particularly important. Partners should feel able to raise concerns early rather than allowing small issues to become bigger problems.
Keep track of responsibilities and progress. A simple shared document or regular check-in can make it clear who is doing what and what still needs to be completed.
Document important decisions. Keeping a written record gives everyone something to refer to.
Review your goals and expectations regularly. Your business may look very different six months or a year after you start, with more customers, new opportunities or a different view of where you want to go.
This is especially important in London, where businesses can grow quickly, and new opportunities often emerge.
Having clear processes in place can help you stay organised as you scale.
Many partnership problems can be avoided by agreeing on expectations from the start and putting them in writing.
A common problem is unclear roles and responsibilities. If everyone assumes someone else is dealing with something, important tasks can easily be missed.
Poor communication can also cause problems. Avoiding difficult conversations might feel easier in the short term, but disagreements are usually easier to resolve when they are addressed early.
Partners should also watch out for unequal workloads or expectations. If one person feels they're doing significantly more than the other, resentment can build quickly. Regular reviews can help identify and address this.
Finally, don't wait until there is a problem to think about disputes, exits or major changes to the business. What happens if one partner wants to leave? What if someone can no longer work in the business? What if you receive an offer to buy the business or decide to change direction?
Planning for these situations when relationships are positive is much easier than trying to work them out during a disagreement.
Your partnership agreement should set out what happens if ownership changes, a partner leaves or the partnership needs to be dissolved.
Starting without a written partnership agreement.
Leaving roles and responsibilities unclear.
Avoiding difficult conversations.
Allowing workloads to become unbalanced.
Not planning for exits, disputes or major changes.
You don't have to work through every aspect of setting up and running a partnership on your own.
Professional support can be particularly valuable when drafting a partnership agreement. A solicitor can help make sure the agreement reflects your arrangements.
An accountant can help you understand your tax obligations, manage financial records and approach the financial side of the business correctly.
If you experience a dispute between partners, getting independent advice early may help you find a way forward before the disagreement affects the wider business.
Professional support can also become increasingly useful as your business grows and becomes more complex. New employees, larger contracts, investment, additional partners or changes to the business structure can all introduce new considerations.
If you're a London-based business owner and are not sure what support is available, Grow London Local provides free access to business support, resources, events and advice for London's small businesses.
You can also explore Grow London's trusted partners, including organisations that provide specialist expertise to businesses looking to set up and grow in London.
A partnership can be a great way to combine skills, share responsibilities and grow a business.
The strongest partnerships are built on clear expectations, open communication and a shared understanding of how the business will operate.
Getting these foundations right from the start can help you build a stronger, more resilient business.
At Grow London Local, we understand that you’re passionate about your small London business. That’s why our website is packed with resources tailored to you. Find more support
