Partnerships
There are three types of partnership:
- "Ordinary" Partnerships.
- Limited Partnerships.
- Limited Liability Partnerships.
All three types involve two or more individuals (a partner can also be a limited company or another partnership) trading together and sharing the commercial risks, costs and responsibilities of being in business. The partnership must keep proper accounting records relating to all sources of income and items of expenditure.
Each partner must register as self-employed with HM Revenue and Customs (HMRC) and complete an annual self-assessment tax return. A nominated partner must also send HMRC a partnership return.
The business is managed by the Partners, or designated employees. It is recommended that a partnership agreement is drawn up to clarify rights and responsibilities at the outset to avoid any misunderstandings in the future.
Partners in an ordinary partnership are jointly and severally liable for any debts owed by the partnership and so are equally liable for paying off the whole debt. Creditors can claim a partner’s personal assets to repay partnership debts, even when those debts are caused by the other partners. Such unlimited liability can be reduced if a Limited Partnership or Limited Liability Partnership is formed although the creation of such partnerships can involve registering with Companies House and filing accounts and annual returns so specialist advice is required before entering into such a structure.
For advice and guidance on the best form or partnership for your business, please contact us for a free initial consultation.
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