Thursday, 18 June 2009

What kind of business set-up? 2; partnership

A partnership (without the limited liability bit) is very like a sole trader except there's more than one of you running the business.

Home-based partnerships are often a husband and wife team, or civil partners team, running a business together from their home. But there could be two of you living near each other who decide to go into business together. A partnership doesn't have to have just one location.

Partners can split the profits of the business any way they choose. It doesn't have to be equal shares for all.

That's one reason why a partnership agreement drawn up by a solicitor is something no partnership should be without. Even if you're setting up in business with a friend, who's to say you won't disagree over a deal and fall out? Especially as it's perfectly legal for one partner to make a deal without consulting the other partner(s).

Each partner's got to register with HM Revenue as self-employed in the same way a sole trader must register, and using the same form. I can help you with that and it's all included in my prices. Or to find the form yourself, click here.

Then every year each partner must complete a tax return for themselves, and a tax return must also be completed for the partnership itself. I can help you with these.

Partnerships can employ staff (in which case they must register as employers with HM Revenue) but the partners don't count as staff, because the business isn't separate from the partners legally.

You share all the risks and the rewards. So if the partnership makes losses or can't pay its debts, then any or all of the partners face losing their homes, cars, etc. That's even if only one partner has been up to no good. If you're in partnership, legally you're all equally responsible for the business, because it's not separate from you. You are the business - all of you.

Next up: limited liability partnerships.

No comments:

Post a Comment

Please feel free to post your comments here.
I check all the comments before they're posted. That's not because I don't want you to have your say. It's because I don't want any obscene language or spam here. So please don't post that or it will get zapped.