Partnerships

If more than one person starts a business, and they don’t form a company, then they have formed a partnership. It would be best at this point to create and sign a partnership agreement outlining who owns what and is entitled to what, although surprisingly there is no legal requirement to do this.

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Anyone going into partnership has a few more questions to ask themselves. Partnerships often thrive but equally can end acrimoniously, for example when one partner is perceived as inputting less. Be certain of your business partners’ financial circumstances – if the partnership starts to fail and they go bankrupt, the remaining partners will be responsible for the partnership’s losses in a larger share, to the point of the last one standing (yes, the last one to declare bankruptcy). For this reason a limited company with a number of shareholders could be a safer way of doing business and one that we would always explore with you on our free 30 zoom business start up workshop, bookable here.

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In terms of administrative burden, partnership accounts are drawn up and then we complete the partnership pages of the tax return, it is a very similar process to being a sole trader at this point.