PARTNERSHIPS

Question 1

What is a partnership?

Answer 1

An unincorporated business with at least TWO owners that carry on a business in common with a view to make a profit. The agreement can be oral or implied by conduct.

Question 2

What governs partnerships?

Answer 2

In absence of a partnership agreement, the provisions of the Partnership Act 1890 would apply by default. Many of these provisions may have undesirable consequences, so advisable to draw up a partnership contract.

Question 3

Can partnerships have employees?

Answer 3

Yes - but an administrative burden.

Question 4

Disadvantages of a partnership?

Answer 4

Not a separate legal entity
No separation between business and partners’ personal affairs/assets are at risk.
Liable for any debts incurred whilst they are partners, may become bankrupt if business is unsuccessful.

Question 5

Advantages of a partnership?

Answer 5

No separation of ownership and control
Management is straightforward
No costs to set up
No onerous ongoing formality, decision-making, filing and disclosure requirements.
Private
Less expensive

Question 6

Parternship obligations?

Answer 6

Nominated partner should file parternship taxes with HMRC
Individual partners pay income tax on their share of the trading profits and capital gains tax
May nee to register to pay VAT