Partnerships
A partnership is a business that is owned by between 2 and 20 people. The partners work together to try and make a profit big enough for all of the partners to share.
Lots of businesses are partnerships, such as solicitors, accountants and builders. Even my window cleaner has a partnership. Just the two of them stealing cups of tea as they go!
Lots of businesses are partnerships, such as solicitors, accountants and builders. Even my window cleaner has a partnership. Just the two of them stealing cups of tea as they go!
Advantages of being a partnership:
- You have other people to share the work with.
- You can get money off the other partners to expand your business.
- You can share ideas with other people
- You can share all of the bills
- Partners can specialise. One of you may be good at selling things, another may be good at the paperwork. You no longer have to do everything!
- You have somebody to keep the business running when you go on holiday or you are off sick.
Disadvantages of being a partnership:
- Unlimited Liability - just like being a sole trader, if you get into debt you could end up losing your house and personal possessions. And it gets worse for partners. If one of your partners gets into debt, you could still be forced to sell your house. Now my wife would not like that idea!!
- Arguments - you don't make the decisions any more. You have to agree. Or argue. Or break up. Pass me the tissues. sob sob!
- You have to share the profits. Even if you do more work than your partners. How unfair is that?!
A couple of other things about partnerships. You can, if you all want, have a Deed of Partnership. This document states who owns what percentage of the business, how the bills should be shared and how the profits should be shared.
If you don't have one of these Deeds (and you don't have to if you don't want) then the law says that everybody is equal in the partnership, so the bills are split equally and the profits are shared equally.
If you don't have one of these Deeds (and you don't have to if you don't want) then the law says that everybody is equal in the partnership, so the bills are split equally and the profits are shared equally.
Finally, some businesses have Sleeping Partners. These are partners who invest money into the business but they don't actually get involved with running the business. Instead, they just sit back and wait for their share of the profits to come in. How lazy is that?!
Limited Liability Partnerships
A recent change in the law has meant that partners can now set up a Limited Liability Partnership (LLP for short). This means that you are no longer liable for the debts that your partners get the business into. It takes a bit of extra work setting it up, but it still gives you the freedom of a partnership.
A recent change in the law has meant that partners can now set up a Limited Liability Partnership (LLP for short). This means that you are no longer liable for the debts that your partners get the business into. It takes a bit of extra work setting it up, but it still gives you the freedom of a partnership.
If, however, you fancy having a bit more security, you could set up a Limited Company. Click here to find out more.