When entering into a partnership agreement you need to ensure that the working relationship between the partners, e.g. in relation to capital input, profit share and retirement, is correctly provided for.
The drawing up of a proper partnership agreement between the partners is strongly recommended. Listed below are some of the main advantages and disadvantages of partnerships:
Pros of partnerships
- Flexibility - adaptable model with no obstacle to switching to a limited company in the future
- Tax - partnership assessment, but income tax due personally by individual partners
- Banking - partnership business account is quick and easy to set up
Cons of partnerships
- Individual partner guarantees - these may be required by a landlord
- Liability to third parties - partnership and personal unlimited liability (partners liable "jointly and severally")
- Accountancy - annual accounts, partnership and individual tax returns
- Documentation - It's highly recommended that a detailed partnership agreement is drawn up
Partnership agreements suit some types of businesses better than others. Give us a call now to set up an appointment and we'll clairfy your options in more detail.