Partnership and Limited Liability Partnership
Having a partnership means sharing the responsibility of business.
You might have more money and resources to invest, but you also share the risks.
If things go wrong and one partner can’t pay their share of debts etc the other is responsible.
One partner can make binding business decisions without the other’s consent, so you must have the highest confidence in the skills and integrity of your partner before venturing down this route.
You should draw up a partnership agreement, setting out precisely how the partnership will be run and who is responsible for what, not to mention how the proceeds will be split. Use a reputable solicitor to prevent disputes and fallouts.
Partners are usually, but not necessarily taxed as self- employed and will need to complete a self-assessment tax return.
The partnership will also need to submit a Partnership Tax Return to HMRC each year.
Limited Liability Partnership
A limited liability partnership (LLP) shares many of the features of a normal partnership but also offers reduced personal responsibility for business debts. Liability is limited to the money they invested into the business and any personal guarantees they have given to raise finance.
Forming an LLP can be expensive and complicated and there are additional running costs such as making financial information publicly available by sending a copy of the annual accounts to Companies House.
Annual returns need to be sent with details of the LLP and its members.
Audited accounts may also be needed, although companies with a turnover of less than £5.6 million and a balance sheet of less than £2.8 million are usually exempt.
Like partnerships, legal agreements need to be carefully drawn up setting out how the LLP will be run and how profits will be shared.
Usually partners are self-employed, and registration with HMRC is needed within three months. Charities or not for profit organisations cannot form LLPs.
KLAS Ltd can help with all areas relating to Partnership and LLP accounts. Please call to discuss with one of our accountants with no obligation on 0151 556 1221
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