Partnership Trading in partnership with others is very similar to being a sole trader with the difference being that there are some partners involved. Partnerships are attractive for smaller-scale businesses or business where there are legal requirements for personal liability to be taken on by the owners, but they are often detoured with people more often opting for company structures.
However, if you do believe a partnership would work best for the business you wish to run, the details below provide some of the pros and cons of partnerships.
- Low-level compliance
- Profits can be split in accordance with the partnership agreement
- Share of losses can be offset against other personal income of each partner
- Allows for pooling of resources between a number of people.
- Joint and Several Liability – which means you remain 100% liable for partnership obligations to third parties
- Decisions of one partner are enforceable against the whole partnership by a third party
- Taxable profit from the partnership will be taxable at higher personal tax rates if the level of income is in those tax brackets.
Prudentia Law is happy to assist clients with preparing appropriate partnership agreements for their businesses if they wish to trade as partnerships. Feel free to contact one of the team to discuss.