Setting up a partnership or LLP allows two or more people or companies to set up a business together, and share the responsibilities and profits.
There are a number of legal requirements to meet when establishing a partnership or LLP, and important decisions to make in moving forward. Ralli solicitors are experienced in partnership law, and can provide expert guidance when organising and entering a partnership or LLP, so that the process remains straightforward and successful.
Choosing a legal structure
A suitable legal structure should take into consideration the requirements of each potential partner or member, and your organisation. When choosing a legal structure (other than a company), there are three options to think about, including:
- General partnership all partners share the profits, and are jointly (and severally) responsible for any losses suffered.
- Limited partnership this consists of general partners who manage the business affairs and are responsible for debts, and limited partners who are passive investors that arent liable for anything other than their investment.
- Limited liability partnership partners arent personally liable for debts, and are only responsible for the amount they have invested. This is a popular option for professional services, including accountants and solicitors.
Many Ralli clients opt for an LLP as the corporate vehicle provides members with limited responsibility for any debts unpaid by the business.
Partnership responsibilities: Tax
When establishing your partnership you will need to ensure that the key responsibilities of the business are split between the partners according to their strengths. This is an advantageous aspect in forming a partnership as it means that tasks can be allocated to those with the knowledge and experience to complete them.
When setting up a partnership you must:
- Choose a nominated partner to register themselves and the business for a tax self-assessment. The nominated partner will take responsibility for the partnerships tax returns and keeping business records.
- The other partners involved must register separately, this usually occurs after the partnership has been registered.
- Each partner must take ownership of their own self-assessment tax return for the year.
As members of an LLP are classed as self-employed for tax purposes, their tax and National Insurance will not come out of their income as it does for employees of a company. Instead they must ensure they pay their income tax on their share of the profits each year themselves, and pay each according to registered earnings at the end of the year.
For this purpose it is essential that accurate book-keeping of all expenses, income and outgoings of the business are kept as each partner will need to submit all records in their self-assessment.
The registration process
When setting up a partnership or LLP, you need to inform HM Revenue & Customs. If you decide to set up an LLP, this must also be registered at Companies House. You must decide whether you want to trade under the name of all partners, or under a business name. A partnership is able to then do business under the registered name, or an alternative title.
Ralli solicitors can assist you during the partnership registration process, offering invaluable advice on business names and what to consider if you decide not to trade under the registered name. Our legal team can also guide you through the incorporation of a limited liability partnership (LLP), which can often be a more complex procedure, ensuring that filings and transactions are correctly completed.
Drafting a partnership agreement
Ralli solicitors encourage partners to set up a partnership agreement, otherwise the partnership is governed by the default provisions of the Partnership Act 1890 or Limited Liabilities Partnership Act 2000, which can restrict how you run your business.
If you are setting up a partnership and want specialist legal support throughout the process, contact Ralli Partnership Law on 0161 832 6131 for a consultation.