Can a company be a partner in a partnership

Yes. A limited company can be a partner in a general partnership, because the Partnership Act 1890 defines partnership as a relation between “persons” and that word includes a body corporate. The company carries the same unlimited liability for the firm’s debts as any other general partner, but it acts only through its directors and other agents, and the shareholders behind it keep their own limited liability.

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What does the law say about who can be a partner?

Section 1(1) of the Partnership Act 1890 says a partnership is “the relation which subsists between persons carrying on a business in common with a view of profit”. Schedule 1 to the Interpretation Act 1978 provides that “person” includes a body of persons corporate or unincorporate, so a company is a person for this purpose.

HMRC’s Partnership Manual at PM120100 says the word persons in section 1 includes artificial as well as natural persons, so an individual, a body corporate or the trustee of a settlement may all be partners, and it expressly includes companies and LLPs. The Insolvency Service’s technical guidance for official receivers (chapter 52, paragraphs 52.17 and 52.28) says the same: a limited company cannot itself be a partnership, because section 1(2) of the 1890 Act excludes companies registered under the Companies Act 2006, but it can be a partner in one. The guidance adds that there are no special rules for a firm with corporate partners.

Under section 31 of the Companies Act 2006 a company’s objects are unrestricted unless its articles specifically restrict them, so check older articles that still contain an objects clause.

PM120100 adds that in England, Wales and Northern Ireland a partnership is not a legal person, so one partnership cannot be a partner in another; a Scottish partnership can.

Is the company liable for all the firm’s debts?

Yes. Section 9 of the 1890 Act makes every partner liable jointly with the other partners for all debts and obligations of the firm incurred while it is a partner, and section 12 makes every partner jointly and severally liable for wrongs for which the firm is liable under sections 10 and 11. A corporate partner is in exactly the same position as an individual partner: there is no cap on its exposure to the firm’s creditors. The general rules are covered in joint and several liability of partners.

What changes is who ultimately bears the loss. The company’s assets are at risk, but its shareholders are not partners. That is why a company is sometimes used as a partner: it puts a limited liability vehicle between the business and its owners.

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How does a company act as a partner in practice?

A company can only act through people. Section 43 of the Companies Act 2006 provides that a contract may be made on behalf of a company by a person acting under its authority, express or implied, and section 44 sets out how a company executes a document: by its common seal, by two authorised signatories, or by one director in the presence of a witness. Section 44(8) confirms that this applies where the company executes a document in the name of or on behalf of another person, which covers a partnership deed or a deed the company signs as a partner.

Within the firm, section 5 of the 1890 Act makes every partner an agent of the firm and of the other partners for the purposes of the business. When a director of the corporate partner deals with a customer in the usual way of the firm’s business, the company’s act as partner binds the firm and the other partners, subject to the usual exception where authority is lacking and the customer knows it. The partnership agreement should name the individuals who may act for the corporate partner.

Do the directors owe duties to the partnership?

The statutory duties in sections 171 to 177 of the Companies Act 2006 are owed by a director to the company (section 170(1)). Section 172 requires a director to act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.

The partnership duties sit with the company as partner. The official receiver’s guidance (paragraph 52.72) records that partners owe each other a general duty of good faith and a statutory duty under section 28 of the 1890 Act to render true accounts and full information. So a director must cause the company to meet its duties to its fellow partners while acting in the company’s own interests. Conflicts, for example where the director is also an individual partner, belong in the partnership agreement.

A director is not a partner merely by acting for the corporate partner. The risk is section 14 of the 1890 Act: anyone who represents themselves, or knowingly lets themselves be represented, as a partner is liable as a partner to anyone who gives credit to the firm on the strength of that representation. Directors should sign as director of the company, not as “partner”. See holding out as a partner.

How is a company partner taxed?

The partnership is transparent for tax, and each partner is taxed on its share. Where any partner is a company within the charge to corporation tax, section 1259 of the Corporation Tax Act 2009 requires the firm’s trading profits to be computed, for that partner, as if a UK resident company (or a non UK resident company, for a non resident partner) carried on the trade. The company pays corporation tax on its share; the individual partners pay income tax on theirs, computed under the income tax rules.

Two effects follow. HMRC’s PM211200 notes that the Annual Investment Allowance is only available to partnerships all of whose members are individuals, so admitting a company partner ends the firm’s access to it. And where a company sits alongside individuals, the mixed membership rules in section 850C of the Income Tax (Trading and Other Income) Act 2005 can reallocate profit from the company to an individual for income tax. Those rules are explained in mixed member partnerships.

Does a firm with company partners have to publish accounts?

A general partnership usually has no duty to file accounts. The exception is a “qualifying partnership” under regulation 3 of the Partnerships (Accounts) Regulations 2008: a UK partnership each of whose members (or, for a limited partnership, each of whose general partners) is a limited company, or an unlimited company or Scottish partnership whose own members are limited companies.

For a qualifying partnership, regulation 4 requires the members to prepare the same annual accounts and reports, and to have the same auditor’s report, as would be required if the partnership were a company, within nine months after the end of its financial year. Regulation 5 then requires each limited company member to append a copy of the partnership’s accounts to its own accounts when it next files at Companies House.

What about limited partnerships and LLPs?

Section 4(4) of the Limited Partnerships Act 1907 says a body corporate may be a limited partner, and Companies House guidance on registering a limited partnership says an individual or a legal body, such as a company, can be a general or a limited partner, but not both at the same time. A company acting as general partner is a common structure because the general partner has unlimited liability under section 4(2). See limited partnerships.

Companies House guidance says an LLP member can be a person or a company, a corporate member; see LLP or limited partnership.

What happens if the corporate partner becomes insolvent?

Section 33(1) of the 1890 Act dissolves a partnership on the death or bankruptcy of any partner, subject to the agreement, but a company is neither “bankrupt” nor dies in that sense. The official receiver’s guidance (paragraph 52.91) says the winding up of a corporate partner is unlikely to dissolve the partnership automatically, because the company continues in liquidation; the liquidator will normally look to resign from the partnership, and the court may also wind up the firm on the just and equitable ground in section 35. Paragraph 52.150 warns that a clause passing an insolvent company’s share to the other partners may be void under section 127 of the Insolvency Act 1986. Compare what happens when an individual partner goes bankrupt.

How does this look in practice, and what goes wrong?

An example

Illustration only. Two architects, Ann and Ben, trade in partnership. Ann wants to hold her share through Ann Design Ltd. The new partnership agreement names the company as partner and records that Ann, as its director, is authorised to act for it. Ann signs letters “for and on behalf of Ann Design Ltd, partner”. The firm can no longer claim the Annual Investment Allowance, and the partners check whether the mixed membership rules could reallocate part of the company’s share to Ann. Because Ben is still an individual partner, the firm is not a qualifying partnership and does not file accounts at Companies House.

Common mistakes

Assuming the company partner gives limited liability to the business. It protects the shareholders, not the company, and the other partners remain fully liable.
Directors signing as “partner”, inviting a holding out claim.
Forgetting that the firm loses the Annual Investment Allowance once any partner is a company.
Missing the Partnerships (Accounts) Regulations 2008 when the last individual partner leaves and every remaining partner is a limited company.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.