Partnerships are one of the most popular arrangements for people going into business together. Anyone can become a partner provided they are over 18 and are legally able to work in the UK, and there are clear positives to forming this type of business:
- there is more capital from the beginning which means more opportunities for growth and flexibility;
- problem solving should be more efficient with more than one person involved;
- work can be split according to the skill-set of the individuals involved thus allowing the business to reach its potential faster;
- In comparison to other business vehicles, partnerships are a flexible way of running a business, as they are not subject to the same level of regulation as companies.
The benefits of a partnership agreement
A partnership agreement helps to create a bespoke contract for the business. This can specify in its terms: the amount of work and capital each partner is required to contribute, what will happen in the event of retirement, death or partner misconduct, and what happens when the partnership is wound up.
Finance advantages to a partnership
When entering into a partnership a key concern is often how partnership tax should be paid, and who is responsible for these partnership tax issues.
For some, one of the main advantages of partnerships is that partners are entitled to self-employed tax status (Schedule D) by HM Revenue & Customs. Partners are able to limit their liability while retaining their self-employed tax status if they convert to a Limited Liability Partnership (LLP).
Unless stated otherwise in the partnership agreement, partners have an equal share the businesses profits.
At Ralli Partnership Law we are experienced partnership law solicitors with extensive knowledge of partnership agreements, and know how to best minimise the disadvantages and optimise the advantages that come with a partnership.