Provided by Aegis Accounting ~ your partner in business
Trading as a Partnership
Partnerships are basically two or more sole traders running the same business, you will each be taxed as a sole trader on your split of the business profits as detailed in your partnership agreement. People often think that more than one person coming together to create a business automatically means they need to form a partnership, but this is only ideal in a few specific situations. For example if you expect partners to come and go on a regular basis then a partnership is much easier to maintain than a limited company shareholder/directorship structure. Also, if you have other income and you expect your partnership to make losses in the first few years then these losses can be carried back to offset that income both from prior years or within that year - the same applies to a sole trader.
Partnerships may seem less formal than a limited company structure, but unless the partners are family and know they can agree to disagree without this effecting the business, then a totally tight and binding partnership agreement is crucial - particularly where partners drawings are concerned. Tax is basically the same as for a sole trader so similar caveats apply, although you can vary your partnership profit split to better reflect the work and duties undertaken by individual partners as and when appropriate. This of course will adjust the individual tax liabilities of the partners in the process (although this shouldn’t be seen as the reason behind the change, particularly in spouse partnerships!). Partnership Setup includes: Evaluation of your chosen trading style for legislative and taxation compliance, plus a customised Partnership Agreement for you and your partners to sign. We will also register your partnership with HMRC and the partners personally for Self Assessment Income Tax. If applicable we will also advise and register you for the most appropriate VAT scheme suitable for your trading structure and introduce you to a local Business Bank who can setup your first trading bank account.