Small Business Adventurers
If you want to go into business with someone, but the Limited Company route doesn't appeal, you can make a quick and simple start with a Partnership.
A Partnership is a lot like a Sole Trader business, only with more people. Example: she's a world-class User Experience expert with a gift for guiding readers around a page. He's an award-winning copywriter with an intense, dynamic style. Together, they fight crime - or at least craft eye-catching websites.
There are slightly different rules for Limited Liability Partnerships and Limited Partnerships, so professional advice is always your best bet.
If you've got two or more self-employed people working together in a simple business structure, then you've got a Partnership. It's not a distinct legal entity in its own right, though. If you want those protections then you might need to look again at forming a Limited Company.
However you decide to organise your Partnership, everyone involved needs to have a clearly understood, legally recognised stake in the business and its assets.
You may know each other well enough to work on good will and handshakes, but those kinds of arrangements don't tend to carry much weight in law. For example, if one Partner wants to leave the business or take it on a different course, you've got a problem.
The Partnership Act of 1890 is generally used to resolve these situations, but it gets tricky if you haven't established everyone's stakes beforehand.
Important things to consider include:
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RIFT Accounting knows all about building winning Partnerships. Whether you're a raw rookie or two days from retirement, talk to us - and get ready to star in your very own buddy movie.
There are specific rules and duties for each type of partnership that are detailed in our Partnerships Guide below.
If you've got two or more people willing to commit to your business, you can set up as a Limited Liability Partnership. In fact, it's not even restricted to people - weirdly, it's actually possible for a company to be a Partner (or "Corporate Member") too.
As with a normal Partnership, each member is entitled to a share of the business' profits. However, some or all of the Partners may have the amount of money they can personally lose limited, and may not be considered responsible for negligence or misconduct of other members. As long as you have two or more "Designated Members", who have more responsibilities, you can have any number of "Ordinary Members".
In effect, an LLP is half-way between a normal Partnership and a Limited company. It's a little more flexible than the latter and a little safer than the former - but doesn't quite have all the benefits of either.
You really can't afford to ignore any of these responsibilities. Designated Members can be prosecuted if they don't keep up with them, and the LLP can be taken off the register altogether.
With a Limited Partnership, you start with at least one "General Partner" and one "Limited Partner". Again, a Partner can be a company. All partners get a share of the profits, and pay tax on them as usual, but your other responsibilities depend on which category you're in.
As with LLPs, a Limited Partnership has to be registered with Companies House, signed up for Self Assessment with HMRC and must file all the necessary paperwork with the authorities. You don't have to send accounts to Companies House unless you've got a Limited Company for a General Partner, but you do have to let them know of any changes to your registered name, address or members.