Going into business? You’ll want to know about various types of partnerships and the ways of setting up a business partnership in the UK.
Choosing a Name
Choosing a name is one of the harder aspects of setting up a business. Trade names are usually protected as intellectual property, so make sure you’re not infringing on someone else’s property rights when you name your company.
If you’re going into business with someone else, choose a nominated partner and register with HM Revenue and Customs (HMRC). The nominated partner is responsible for managing the partnerships tax returns and keeping records.
Setting Up a Business Partnership: Shop As An Entity
There are several ways to set up shop as a partnership. You can choose:
Ordinary Business Partnership
This is the most basic type of partnership which is similar to a sole trader entity. When you set up an ordinary partnership, you are responsible for any losses your business make, bills for things you or your partner buys, and any and all taxes on income.
The partnership will also have to register for VAT if you expect takings of more than £82,000 per year.
Limited Liability Partnerships
LLPs are incorporated entities that are run by 2 or more members. A member can be a company or a person. Each member pays tax on their share of any profits in the company. However, they are not personally liable for the debts of the business.
To form this type of company, you will need to designate at least two members, have a registered address which is publicly available, make an LLP agreement, and register with the Companies House.
A limited partnership or LP has at least one general partner and one limited partner. These legal entities allow for both legal entities and persons to serve as partners, but you must have a registered address, appoint at least 2 partners, and register with the Companies House. All partners pay tax on their share of the profits and, like an LLP, liability for business debts is limited.
Dissolving The Business
No one likes to think it will happen to their company, but many businesses eventually dissolve. If your partner leaves you with a pile of debt, you may be forced to use a company like Claims Direct to recover the funds.
If you leave your partner, but you don’t pay off your share of the debts, your partner may pursue you for payment. In either case, both of you are equally responsible for the business.
You must file dissolution documents to formally end the company.
Any taxes that are due must be paid in the year that they are earned, regardless of whether the business operates for the full year or not. So, for example, if you earned money this year, but you dissolved the business before December, you must still pay tax on any shared profits you generated from business activities during the year.
If you do not, the government may pursue you for payment of those debts.