Limited partnerships in the UK are registered under and regulated by the Limited Partnership Act of 1907. With regards to profit distribution, Limited partnerships are encouraged to draw up their own agreements on profit distribution in a partnership agreement when the company is formed. If they fail to do so, and a dispute is brought before a judge, the judge will simply refer to the Liability Partnerships Act 2000 and that will dictate the outcome of the disagreement. In the absence of a partnership agreement, profits and losses will be allocated on the basis of each partner’s value, which is based on the value of each partner’s contribution.
This drives home how important it is to prepare a partnership agreement so that you are legally protected from your business partners in the event of legal/conflict situations. Always consult with a legal professional to ensure that any contracts you enter or disregard will not land you in legal trouble down the road.