A UK joint venture is usually structured in one of three ways: a jointly owned limited company, a limited liability partnership (LLP), or a contract between the parties with no new entity. A company gives limited liability and a clear governance framework but is taxed on its own profits; an LLP gives limited liability with tax transparency; a contractual joint venture is quick and cheap but can turn into a partnership, with each party liable for the other’s obligations, if the parties share net profits.

What is a joint venture in UK law?

“Joint venture” is a commercial label, not a legal form. The legal consequences depend on which vehicle the parties actually use, or fall into. Section 1(1) of the Partnership Act 1890 defines partnership as the relation between persons carrying on a business in common with a view of profit, and section 1(2) confirms that members of a company registered under the Companies Act 2006 are not partners.

HMRC’s Partnership Manual (PM131800 and PM131900) explains that an arrangement falling short of partnership is most likely where parties who already run their own businesses cooperate on a single project but do not calculate and share net profits or losses. Where they do agree to share net profits or losses, a partnership is likely even if their agreement says otherwise. HMRC’s VAT guidance (VTAXPER52000) makes the same point: a written agreement denying partnership is not conclusive, and HMRC looks at all the facts to find the parties’ true intention.

How does a contractual joint venture work?

Each party stays in its own business and signs a collaboration or teaming agreement setting out who does what, who bears which costs, who invoices the customer and how revenue is split. Nothing new is registered, and each party accounts for its own income and costs. This suits a single project, a joint bid, or a sharing of resources where each party is paid for its own work.

The risk is accidental partnership. If the arrangement becomes a business carried on in common with the parties sharing net profits, the Partnership Act applies. Under section 5 every partner is an agent of the firm for the usual business, and under section 9 every partner is jointly liable for the firm’s debts and obligations incurred while a partner. For VAT, HMRC says that if a partnership exists it is the taxable person and registers if its turnover exceeds the threshold.

To keep a contractual venture contractual, pay each party for its own deliverables or split gross revenue, avoid a joint profit and loss account and joint bank account where possible, and set out clearly that neither party can bind the other.

When is a joint venture company the better choice?

A jointly owned company suits a long term venture with its own staff, assets, customers or external finance. The company contracts in its own name and the parents’ exposure is normally limited to their investment, unless they give guarantees. Section 33 of the Companies Act 2006 makes the articles binding between the company and each member as if they were covenants.

Voting thresholds drive the governance design. An ordinary resolution needs a simple majority (section 282) and a special resolution needs at least 75% (section 283); articles can only be amended by special resolution (section 21). A partner with more than 25% can therefore block changes to the articles, and in a 50:50 company neither side can pass even an ordinary resolution alone. That is why a shareholders’ agreement is essential: it lists reserved decisions needing both parties’ consent, deadlock procedures, funding obligations, transfer restrictions and exit routes.

For tax, the company pays Corporation Tax on its own profits and returns value by dividends or charges. Where the shareholders are companies, consortium relief may be available: under section 153 of the Corporation Tax Act 2010 a company is owned by a consortium if it is not a 75% subsidiary of any company and at least 75% of its ordinary share capital is owned by companies each owning at least 5%. See group relief for Corporation Tax. A corporate partner with a significant stake will also need to be recorded as explained in persons with significant control.

When does an LLP suit a joint venture?

Under section 1 of the Limited Liability Partnerships Act 2000, an LLP is a body corporate with legal personality separate from its members and unlimited capacity, and partnership law does not apply to it except where provided. Section 2 requires two or more persons associated for carrying on a lawful business with a view to profit, so an LLP is not suitable for a non profit venture.

The main attraction is tax transparency. Where an LLP carries on a trade or business with a view to profit, section 863 of ITTOIA 2005 (income tax) and section 1273 of CTA 2009 (Corporation Tax) treat its activities as carried on in partnership by its members, so each member is taxed on its share. Losses and profits flow to the joint venturers directly.

The default rules make a members’ agreement essential. Regulation 7 of the Limited Liability Partnerships Regulations 2001 provides, unless agreed otherwise, that all members share equally in capital and profits, every member may take part in management, no member is entitled to remuneration, no new member may join without all members’ consent, and ordinary business questions are decided by majority. Few joint ventures want those terms. If fewer than two designated members are specified, every member is a designated member (section 8(2) of the 2000 Act). More is in limited liability partnerships and mixed member partnerships.

How do the three structures compare?

Feature Contractual Company LLP
New legal entity No Yes Yes
Liability for venture debts Each party for its own obligations; joint if it is a partnership Company’s own debts LLP’s own debts
Tax on profits Each party on its own share Company pays Corporation Tax Members taxed on their shares
Main documents Collaboration agreement Articles and shareholders’ agreement Incorporation document and members’ agreement
Registered at Companies House No Yes Yes

What documents are needed?

  • Contractual: a collaboration agreement covering scope, each party’s contributions, cost and revenue allocation, intellectual property, confidentiality, liability caps, termination and a clear statement that neither party is the other’s agent.
  • Company: articles, a shareholders’ agreement, and agreements between the company and each parent for services, supplies, secondments, licences and loans. Any guarantee a parent gives for the venture’s borrowing should be considered by that parent’s board on its own merits.
  • LLP: the incorporation document delivered under section 2 of the 2000 Act, and a members’ agreement replacing the regulation 7 defaults with agreed rules on capital, profit shares, management, exit and restrictions.

Each venturer then accounts for its interest under FRS 102 Section 15, explained in FRS 102 joint ventures.

How does the choice play out?

Illustration only. Two engineering consultancies want to bid together for a three year infrastructure contract.

  • If each will deliver a defined package and invoice the client separately, a teaming agreement is enough, and neither takes on the other’s liabilities.
  • If the client insists on one contracting party, they could form a 50:50 company, with a shareholders’ agreement covering deadlock and what happens to staff and intellectual property when the contract ends.
  • If both want profits and losses taxed in their own hands, an LLP with a full members’ agreement does that while keeping limited liability.

What mistakes do joint venturers make?

  • Sharing net profit under a “not a partnership” clause. HMRC and the courts look at substance.
  • No deadlock mechanism in a 50:50 company. Neither party can pass an ordinary resolution alone.
  • Relying on LLP default rules. Equal profit shares and unanimous consent for new members rarely match the commercial deal.
  • Forgetting exit. The documents should say who keeps the assets, staff and customers when the venture ends.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.