Setting up a Partnership - Lots of Questions (WELL a FEW?!)

[lejc2425]

Right OK. I THINK I understand the ins and outs of setting up a partnership. You register your partnership, you can write up an agreement and you have unlimited liability in the partnership etc etc.

Then when the time comes. One of the two members of the partnership completes a tax return with revenue, costs and profit. Then each partner completes their own personal tax return and puts their income as 50% of the profit (assuming it is a 50:50 partnership).

Am I right so far?

The partnership itself pays no tax, it's the individuals who are part of that partnership who pay the tax... Correct?

Am I also right in saying that it is the individuals responsibility to pay their own tax? So if Partner a is on the ball and pays on time and Partner b doesn't, will Partner a suffer?

Also, what happens if one of the partners lives abroad. For example, both partners work in ecommerce but one lives here in the UK, the other lives in Malaysia but is a former UK resident... What happens then?

That's all for now, but I am sure the answers will spark more questions.

Thanks in advance for any help provided. I really appreciate it.

 

[Walkol]

Right OK. I THINK I understand the ins and outs of setting up a partnership. You register your partnership, you can write up an agreement and you have unlimited liability in the partnership etc etc.

Then when the time comes. One of the two members of the partnership completes a tax return with revenue, costs and profit. Then each partner completes their own personal tax return and puts their income as 50% of the profit (assuming it is a 50:50 partnership).

Am I right so far?

The partnership itself pays no tax, it's the individuals who are part of that partnership who pay the tax... Correct?

Am I also right in saying that it is the individuals responsibility to pay their own tax? So if Partner a is on the ball and pays on time and Partner b doesn't, will Partner a suffer?

Also, what happens if one of the partners lives abroad. For example, both partners work in ecommerce but one lives here in the UK, the other lives in Malaysia but is a former UK resident... What happens then?

That's all for now, but I am sure the answers will spark more questions.

Thanks in advance for any help provided. I really appreciate it.

Correct all all counts, although I am not qualified on the living abroad aspect, shall let someone more informed answer that one!

 

[Mitchells Bristol]

Am I right so far? Also, what happens if one of the partners lives abroad. For example, both partners work in ecommerce but one lives here in the UK, the other lives in Malaysia but is a former UK resident... What happens then?
.

They will need to apply for a UK "unique taxpayer reference" (UTR) if they do not already have one, in order to be able to submit the partnership tax return.

Only other thing is that the partnership tax return needs to be submitted online, so some software may be needed to do this.

 

[dimitri1]

hi
Non-UK residents for tax purposes are taxable on UK income. However, non-UK residents is not taxable on certain UK income, the most important of which is perhaps dividends from UK companies (subject to local taxes).

 

[NickGrogan]

The best advice my accountants have ever given me.

Never, ever, ever, ever start a partnership. Ever.

I have seen others who have been great friends start a partnership and within a few years no speaking, taking legal actions, etc, etc.

Why would you want unlimited liability for somebody else's potential debts?

Setting up a Ltd company is cheap and has many benefits.

 

[lejc2425]

Really?

How easy is it to set up a limited company?

Isn't it a whole lot more complicated though?

 

[NickGrogan]

Really?

How easy is it to set up a limited company? There are plenty of sites where you can setup an ltd online. Cost is around £15-50 depending on the extras you want/need.

Isn't it a whole lot more complicated though?

Not really, and much much easier than unpicking a broken partnership.

Talk to a half decent accountant and off you go.