One of the questions we are most frequently asked by both current and especially by new clients relates to the most appropriate structure for their business. It’s rarely a topic that has a clear answer as there are advantages and disadvantages to a corporate structure and indeed, other alternatives. In this article we have discussed the most recognised ways to run a business and some of the advantages and disadvantages of the different structures. This week we explore partnerships.
Partnership structure:
A partnership recognises that two or more individuals may want to run a business together and still be considered self-employed for tax purposes.
Advantages:
- Provides a legal structure, with a set of rules (a partnership agreement) that will facilitate individuals running a business together.
- Helps to share the responsibility of managing and developing a business.
Disadvantages:
- More complex tax filing required, both the partnership and the partners will be required to file a tax return.
- As with a sole trader structure, if the business becomes insolvent, creditors will be able to access the personal assets of the partners (including their homes) to obtain payment of their debts.
- In the same way, personal assets can be put at risk if third party claims cannot be met by insurance or business funds.
- At higher levels of profitability, it will in most cases pay to incorporate your business to save tax.
- A business partnership involves two or more people to work together. If these relationships break down, dissolving a partnership can be an expensive and time-consuming activity.
If you are need help with your partnership tax returns, or any other aspects of your business accounts please contact us at MJB Avanti (08000) 388 799