New Company Formation - Ltd or Partnership?

[Airia]

Hi,

Quick survey of opinions please - Myself & a collegue are starting a new business, Split 50% each all the way.
When forming the company (as we plan to next week) should we go for a "Partnership" or "Limited Company"?
Which would have more credibility in the market place?
Which is easier to admininstrate financially?

Pro's & con's of both options would be most welcomed.

Thanks!

 

[Mattonella Tile Studio]

Not sure it's the best thing to decide by canvassing opinions on the legal structure of your business.

I can answer your questions as I have both - I think the Ltd company gives slightly more credibility, but not a lot.

The partnership is easier to look after in terms of finances.

But that isn't the reason I've got one of each. Take advice from a professional, on your own circumstances, as to which structure suits you best.

 

[Maslins]

Benefits of company:
Gives limited liability (though bank will often require personal guarantee)
Possible slight extra credibility
Can be more tax efficient if large profits made

Benefits of partnership:
Easier to setup, less admin generally
More secrecy (you don't have to file accounts on public record)
Can be more tax efficient if losses made (partners set off against personal income)

 

[KM-Tiger]

50/50 is highly dangerous. How will a decision get taken if you cannot agree?

 

[wood1e2]

I would look at partnership, much more effective than a limited company. Obviously if you are selling something/or developing something with high financial risk then I would go limited as you don;t want to be left personally financially responsible.

 

[Airia]

Not sure it's the best thing to decide by canvassing opinions on the legal structure of your business.

Hi - Wasn't going to decide just on this post, just hoping for more info & experiences really.
Thanks for all the replies so far.

If we go for a partnership, can we then employ staff at a later date?
or
Can we change into a Limited Company at a later date?

 

[MyAccountantOnline]

If we go for a partnership, can we then employ staff at a later date?
or
Can we change into a Limited Company at a later date?

Yes and yes.

Have you thought about seeing an accountant? Their really are lots of considerations when setting up in business, including choosing the right business structure for you, and a good accountant will be able to provide you with a huge amount of support and proper advice. You will find most good qualified accountants will also offer you a free intial consultation.

Good luck with the new venture

 

[Airia]

Thanks for the help so far - I also wondered if it's worth waiting unitil 6th April to register the company to tie in with the start of the new financial year?

Also, as I'm (we're) still employed are we legally allowed to form a company? - we don't plan to trade until current employment is fully terminated.

 

[PromoAde]

Go for a partnership, it is so much easier to run than a ltd company. There is much less paperwork involved and above all else it is much cheaper when starting out.

I would wait until the start of the tax year, as you will have to file accounts for both years otherwise.
You start a company even if you are already employed, it just needs to be stated when you tell the tax office. It's all to do with declaring income. Anyone can have a job and run a business as long as HMRC know about both.

 

[PromoAde]

Also if you want to split 50/50, have a read over this interesting blog post which may help you see things from a different angle -
http://sethgodin.typepad.com/seths_blog/2009/03/advice-on-equity.html

 

[Airia]

Also if you want to split 50/50, have a read over this interesting blog post which may help you see things from a different angle -
http://sethgodin.typepad.com/seths_blog/2009/03/advice-on-equity.html

Wow, that totally puts a diferrent angle on it!
- UPDATE - following much discussion & debate, we have begun registration as a limited company, and hope to have this completed within the next couple of days.

 

[P47]

Airia

I see that you have started to register as a limited company - but have you considered a limited liability partnership - an LLP.

This gives you the advantage of limited liability (and is as "credible" as a limited company) whilst at the same time allowing you the tax advantages of a partnership.

But as another poster said - go an see an accountant - he/she will run through the pros and cons properly and then you can make a properly informed decision.