6.1 A partnership is the default legal structure which applies where two or more persons (or bodies such as local authorities) undertake a shared venture with the intention of making a profit. It is the default structure in the sense that the Partnership Act 1890 applies to all such joint ventures unless it is positively dis-applied, for example by the creation of an alternative legal structure such as a company, or by a clear statement by the parties, for example in a contract.
6.2 A partnership only exists where the parties are undertaking a shared venture with a view to a profit, so it will not arise where there is not intention to make a profit, as for example where the intention is the joint provision of services at the public expense.
6.3 Where a partnership exists, the Partnership Act 1890 provides that all the partners are jointly and severally liable for the whole of any debts incurred by any other partner on behalf of the partnership. So where one partner has incurred a debt, the creditor may sue any partner for the full debt. There is no limited liability in a partnership, so this can be a very substantial liability. Partners will normally enter a legally-binding Partnership Agreement under which they agree to put capital into the partnership and to indemnify each other out of the partnership's funds for any such liability, but that indemnity is only good for so long as the partnership has funds from which to indemnify the individual partner. That Partnership Agreement may also provide for the distribution of any profit between the partners.
6.4 One advantage of a partnership is that it is tax-transparent. So any profit which is made by the partnership is split between the partners, and is then taxed in the hands of each partner. As local authorities are not liable for Income tax or Corporation Tax, this means that the local authority as partner receives its share of any profit without any deduction of tax.
6.5 In practice, because of the need for an intention to make a profit and unlimited joint and several liability, local authorities would be unlikely to use a partnership for joint working.