Enterprise - Partnerships

HMRC

If you’re starting or joining a new business partnership, both the partnership and each partner need to be registered for Self Assessment. The partner nominated to receive and send in the partnership tax returns must complete the partnership registration form. It’s quick and easy and can be done online.

You must register as a partner in the business if you’re an individual. HMRC will use the information you send to set up the right National Insurance records for you too. You can do this online. It will help if you have information about the partnership to hand before you start, for example:

- Address and postcode
- Partnership Unique Taxpayer Reference
- Company registration number (if registered with Companies House)

If a company, trust or another partnership becomes a partner in the partnership, it needs to be registered for Self Assessment too. The person responsible for the new partnership, for example, the trustee or company secretary, should complete and sign form SA402.

Source: hmrc.gov.uk


Types of partnership

There are three types of partnership:

1) 'Ordinary' partnerships
2) Limited partnerships
3) Limited liability partnerships (LLPs)

All three types of partnership have the following features in common:  

- Two or more persons – ie the partners - share the risks, costs and responsibilities of being in business
a partner can be an individual or another business, eg a limited company or another partnership
- The profits and gains of the partnership are shared among the partners, unless the partnership agreement states otherwise
- Each partner is personally responsible for paying tax on their share of the profits and gains, and for their - National Insurance contributions
- Each partner must register for Self Assessment with HM Revenue & Customs (HMRC) and complete an annual tax return
- A nominated partner must also send HMRC a partnership return
- Partners raise money for the business out of their own assets and/or with loans
- The partners themselves usually manage the business, although they can delegate certain responsibilities to employees
- It's possible to have 'sleeping' partners who contribute money to the business but are not involved in running it from day to day
- The partnership must keep records showing business income and expenses

Ordinary partnership

'Ordinary' partnerships An 'ordinary' partnership has no legal existence distinct from the partners themselves. If one of the partners resigns, dies or goes bankrupt, the partnership must be dissolved - although the business can still continue.

A partnership is a relatively simple and flexible way for two or more people to own and run a business together. Ordinary partnerships also have to be registered with HMRC for tax purposes. The nominated partner does this by registering the partnership for Self Assessment. If the partnership has debts, the partners are jointly liable for any amounts owed and so are equally responsible for paying off the whole debt.

Creditors can claim a partner's personal assets to pay off any debts - even those debts caused by other partners. If a partner leaves the partnership, the remaining partners may be liable for the entire debt of the partnership. Therefore, partners do not enjoy any protection if the business fails.

Source: businesslink.gov.uk


Naming a partnership

A partnership can trade under the names of the partners, 'Wright, Brown and Ali LP', for example, or it can use another business name - such as 'Fantastic Design Solutions Limited Partnership'.

If your trading name does not include the partners' names, you must still make sure that your business website and stationery - such as letters and invoices - display all of their names as well as the trading name - for example, 'Wright, Brown and Ali, trading as Fantastic Design Solutions Limited Partnership'.

If there are more than 20 partners then the business website and stationery do not have to list them, but they must show the address of the partnership's principal place of business.

The trading name should not be the same as, or too similar, to that of any existing business, and it should not contain words that people might find offensive or misleading.

Source: businesslink.gov.uk