Starting a Business Partnership

[Deleted member 304182]

Hi, me and my mate are both 16 and we want to start a business partnership. We were trying to do this today but couldn't really find any solid information about the exact process of how to do it. Do we need to both individually register as self employed, or does this happen anyway when we register the business partnership? Do we have to be sole traders? How can we actually put a partnership agreement into effect after creating it? Can we use a personal bank account to receive funds from the business, as being under 18 we can not create a business bank account.

Thanks for any help.

 

[Chris Ashdown]

You also cannot sign contracts and i expect you don't understand the legal description of being in a partnership

Before you make up your mind look up this forum on people trying to get out of contracts like shareholding in companies and partners running up large bills and so forth without the others knowing

A bit more information on what you are aiming to do will bring in more advice to help you

 

[Deleted member 304182]

You also cannot sign contracts and i expect you don't understand the legal description of being in a partnership

Before you make up your mind look up this forum on people trying to get out of contracts like shareholding in companies and partners running up large bills and so forth without the others knowing

A bit more information on what you are aiming to do will bring in more advice to help you

We do know the legal description, and we feel we can make the business work, we just need to get the legal stuff done.

If we did manage to register the partnership, is there any way that we would be able to legally offer our services to other small businesses?

 

[Gecko001]

Remember guys that if you go into a shop to buy say a pair of trainers, you in fact enter into a contract with the shop, even if you are under 18. It is only certain contracts that you cannot enter into when you are under 18 years old. Basically they are contracts in which you promise to do something that you could be sued for if you fail to do it. For instance you cannot enter into a contract where you promise to pay for something at sometime in the future.

 

[Scalloway]

Do we need to both individually register as self employed

Yes then one of you registers the partnership with HMRC.

How can we actually put a partnership agreement into effect after creating it?

You work together in the business.

Can we use a personal bank account to receive funds from the business

As a partnership you and the business are the same so that is no problem.

I would advise you that partnership is the worst way to set up a business. Each partner is jointly and severally liable for all partnership debts. So one partner can enter into an expensive agreement on behalf of the partnership, then leave the other to pay off every single penny.

The law governing partnerships is here.

http://www.legislation.gov.uk/ukpga/1890/39/pdfs/ukpga_18900039_en.pdf

 

[Deleted member 304182]

Yes then one of you registers the partnership with HMRC.

You work together in the business.

As a partnership you and the business are the same so that is no problem.

I would advise you that partnership is the worst way to set up a business. Each partner is jointly and severally liable for all partnership debts. So one partner can enter into an expensive agreement on behalf of the partnership, then leave the other to pay off every single penny.

The law governing partnerships is here.

Thanks for your reply. With the partnership agreement, I meant as soon as we both sign it, does it become "legally binding", or is there something else we need to do like submit it to HMRC?

Also, we have looked at the different business structures, and at first we were going to form a limited company but I really do not think it is necessary at the moment as we are not planning on taking any loans as we have enough funds ourselves at the moment to fund the business, and we really shouldn't ever need a loan.

Do we both register as self employed, or as a sole trader? Cheers.

 

[Scalloway]

With the partnership agreement, I meant as soon as we both sign it, does it become "legally binding"

Yes it will be legally binding when you sign. One of you need to register the partnership with HMRC and get a UTR for it. Nothing further is needed.

Do we both register as self employed, or as a sole trader?

Yes you both need to register as self employed and get UTRs. One of you needs to register the partnership with HMRC and get a UTR for it.

 

[Mr D]

Thanks for your reply. With the partnership agreement, I meant as soon as we both sign it, does it become "legally binding", or is there something else we need to do like submit it to HMRC?

Also, we have looked at the different business structures, and at first we were going to form a limited company but I really do not think it is necessary at the moment as we are not planning on taking any loans as we have enough funds ourselves at the moment to fund the business, and we really shouldn't ever need a loan.

Do we both register as self employed, or as a sole trader? Cheers.

Limited company isn't needed for loans. The company has advantages in liability protection - a partnership you are personally liable for business debts, each of you. A company then the company is liable for business debts.
It worth talking over with a business adviser what the best method is for you. For some people they start off with one method then later move to another.

 

[Gecko001]

Registering a partnership with HMRC? Do HMRC have a register of partnerships? Are they a registering authority? Using the term "registering" implies that the partnership is registered in a similar way as trademarks are registered or a Ltd Company is registered with Companies House. Surely you mean that HMRC recommend that you tell them about your trading activities and that involves the name under which you trade. There is no requirement to "register" a business in the UK. In some countries there is this requirement, but not in the UK.

 

[Scalloway]

You need to register a partnership with HMRC to get a UTR for filing the partnership self assessment, the same as you register to get a UTR if you are a sole trader.

HMRC are only interested in getting the correct tax, nothing else.

 

[Gecko001]

That is

You need to register a partnership with HMRC to get a UTR for filing the partnership self assessment, the same as you register to get a UTR if you are a sole trader.

HMRC are only interested in getting the correct tax, nothing else.

I totally agree it is all about paying tax. Nothing more. Unfortunately when the term "registering" is used in connection with start ups, some people jump to the totally wrong conclusion that all businesses have to be officially registered in some way. An urban myth that many scam companies play upon by charging say £100 to "register" your business for you. Or dubious financial advisors advising people that they do not have a "proper" business unless they form a Ltd Company and then offering to set up a Ltd company for a fee. No disrespect intended to financial advisors here.

 

[billmccallum1957]

Don't start as a partnership, it can be a nightmare, who gets to make a final decision?

If you are equal partners and you disagree about something, how on earth can you do anything?

If you set up a limited company and you have 51% and you friend has 49%, that gives you overall control, you can still make joint decisions, but if it comes to the point where you can't agree then you have the final say. But will your friend agree?

 

[Deleted member 304182]

Thank you all for your information and help, really appreciate it.

I just have two more questions. If we are in a business partnership, I assume the business name would be in the following format: "name one and name two, trading as ...". Is that correct?

Also regarding contracts again, both being under 18, is it possible for us to create a contract with a business for us to offer our services and it be legally binding? If not, do we need a contract or is there a way around this?

Thanks.

 

[Chris Ashdown]

Get your parents in to make the contract and run the bank account until you are old enough

 

[Gecko001]

Also regarding contracts again, both being under 18, is it possible for us to create a contract with a business for us to offer our services and it be legally binding? If not, do we need a contract or is there a way around this?

No. In that situation, you will not be able to enter into a binding contract as far as I can see.

 

[Gecko001]

Thank you all for your information and help, really appreciate it.

I just have two more questions. If we are in a business partnership, I assume the business name would be in the following format: "name one and name two, trading as ...". Is that correct?
.

It depends on whether you have formed a Ltd Co. or a partnership.

Companies House is the authority that you apply to form a Ltd Company and they will have certain rules as to what the Company can be called. They have to approve the name before they allow the Ltd Company to be formed. This is the formal name that you must use in all formal business documents such as invoices, receipts and also on any website you have in connection with the company. Often companies just use the Ltd company name in small print on official documents and trade under a completely different name. They might be trading under the name "XYZ Widgets" and all their branding uses that name, but the company name might be "ABC industries Ltd". In the small print they will put "ABC Industries Ltd trading as XYZ Widgets".

If the business is not a Ltd company, but a partnership, then the name does not have to be approved by any authority or registered with anybody. The following link explains the situation very well:

https://www.gov.uk/set-up-business-partnership/naming-your-partnership

 

[Deleted member 304182]

Ah okay I see. We are going to form the partnership, but do you know of any way that we can deal with a business without a contract? Is it needed? We would be taking payments for our services on a monthly basis.

Also, we are so confused about the different forms. If I am the nominated partner, do I need to first register as self employed, then register the partnership, or does registering the partnership register me for self assessment automatically? Does my partner then just fill out the "SA401" form to join the partnership, or Does he need to first register as self employed first?

One more thing. Regarding taxes, do we pay taxes for the Business, or for each of our individual incomes? Im confused as someone said we both need a UTR number as well as a business UTR number, so I'm confused which would be used?

Really do appreciate the help, thanks.

 

[Gecko001]

I think you need to get a parent involved if you want to have binding business contracts in the way that you describe.

Also, you could contact your bank for some help or if you do not have a bank account, you could get a parent to contact their bank. Banks can be quite helpful on occasions concerning business matters.

 

[Chris Ashdown]

Ah okay I see. We are going to form the partnership, but do you know of any way that we can deal with a business without a contract? Is it needed? We would be taking payments for our services on a monthly basis.

Taking payments may be a problem, Are they doing it online in which case you need a raiment service provider to handle it, If not ecommerce then many companies use credit/ debit cards as well as cheques

You need to investigate this matter

 

[Gecko001]

Don't start as a partnership, it can be a nightmare, who gets to make a final decision?

If you are equal partners and you disagree about something, how on earth can you do anything?

If you set up a limited company and you have 51% and you friend has 49%, that gives you overall control, you can still make joint decisions, but if it comes to the point where you can't agree then you have the final say. But will your friend agree?

This is a fair point, but it depends on the business. Many partnerships last the test of time if people work at it. Partnerships are not always 50/50 by the way.

I would suggest that the OP gets a partnership agreement drawn up. Probably the most important aspect of such an agreement are the clauses dealing with what happens when the partnership is dissolved.

 

[Deleted member 304182]

This is a fair point, but it depends on the business. Many partnerships last the test of time if people work at it. Partnerships are not always 50/50 by the way.

I would suggest that the OP gets a partnership agreement drawn up. Probably the most important aspect of such an agreement are the clauses dealing with what happens when the partnership is dissolved.

We do plan on getting a partnership agreement. We've known each other since age 4 and are good friends so its not too much of an issue. Is there any chance you would know any answers to the questions regarding the registration forms and taxes? That's what we are really struggling with at the moment, I can't see to find any info about it online.

 

[Mr D]

Even the best of friends, even brothers, can have disputes and go in different directions.
Plan for the problems such as disagreement, closure of business etc - then work at it. You can be protecting your future selves.

 

[Chris Ashdown]

Nearly every divorced couple started holding hands in public, stealing a quite kiss, thinking the other was the best thing since sliced bread and the sun shone out of their xxxx, they got married and had kids. Then something happened and now the are divorced and the same thing happened to thousands every year

A breakup is likely to happen to you so make sure you have it sorted before you start, with the equivalent of a shareholders agreement that limited companies have

WE still don't know what sort of work you will be doing, not the details, you may find more help on the forum if they know whet your plan is

 

[Scalloway]

Also, we are so confused about the different forms. If I am the nominated partner, do I need to first register as self employed, then register the partnership, or does registering the partnership register me for self assessment automatically? Does my partner then just fill out the "SA401" form to join the partnership, or Does he need to first register as self employed first?

You need to fill in this form to register as self employed and register the partnership.

https://www.gov.uk/government/uploa..._data/file/607225/SA400__No_fields__04_17.pdf

Your friend needs to fill in this form to register for self assessment and register as a partner.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/359508/sa401-static.pdf

One more thing. Regarding taxes, do we pay taxes for the Business, or for each of our individual incomes? Im confused as someone said we both need a UTR number as well as a business UTR number

You will do accounts for the partnership that will be entered in the partnership self assessment return. This return will detail what share of the profit each partner gets. It will be filed under the partnership UTR.

Each partner will do a self assessment return under their own UTR. All their income including their share of the partnership profit will go on this return. They will each pay tax based on all their individual income.