Setting up a Partnership

djb85

OK here we go.

I'd really appreciate your help on this one...and hopefully this thread will be useful to anyone in a similar position.

I'm setting up a partnership with 2 other guys at the moment and we have a few queries as I'm sure anyone doing this for the first time would...

• Do we register the name of the partnership with the CRO and then become liable to personal tax as a self-employed individual?

• Should we draw up a contract to legalise the partnership or is registering with the CRO covering this?

• Also 1 of us is a registered Phd student so how would that work as regards taxation? Assign your tax credits to the new registered partnership?

• Is it necessary to have a partnership bank account to lodge cheques/deposit earnings and then split the profits 3 ways?

• With regard to setting up a website, who would you guys recommend for registering (.ie), hosting and design? (Irish company preferably)

Thanks for the help and as I said hope some answers will help others.

D

drunkmonkey

Are you all contributing an even share? If everybody putting in an equal amount of hours / cash?

think very hard before you start a partnership, it's very rarley a 50/50 split if your not in pratice, doctor, solicitor etc.

You would definatly have to draw up a legal agreement, talk to a solicitor or your local enterprise board.

djb85

drunkmonkey wrote: »

Are you all contributing an even share? If everybody putting in an equal amount of hours / cash?

think very hard before you start a partnership, it's very rarley a 50/50 split if your not in pratice, doctor, solicitor etc.

You would definatly have to draw up a legal agreement, talk to a solicitor or your local enterprise board.

Yes we are all investing the same amount of hours/cash into this and each individual in the partnership is key to it being successful.

Once past the initial investment for equipment, we are providing a service so future investment would be minimal.

Thanks for the advice drunkmonkey! I'll get onto a solicitor.

antoinolachtnai

Generally speaking, a partnership structure should not be used. Sole trader with subcontracting, or a limited companies are the acceptable ways to operate a company.

A partnership structure opens up a great deal of risk for all the parties.

The solicitor should be able to fill you in on all of this.

drunkmonkey

try the enterprise board first they may have somebody to give you free advice, a solicitor will cost you..

with a partnership you have to take into account, you may fall out with each other, if one pulls out, does the businness collapse...what will it cost to pay off that partner..there's more con's with a partnership than pros depending on the type of business...

djb85

What risk would I have in a partnership that I wouldn't have in a company? We will be providing a service so our costs of operation will be low after the initial investment so we will not be forming a Ltd company.

drunkmonkey: your point that if one of us decide we don't want to do it anymore is a good one...but how is this different if we form a company?

Say an individual does pull out of a 3-person partnership where each of us will own 33.33% of the company. I presume any cash they are owed at that point is paid to them and the 2 remaining share 50% of the partnership. Would we have to re-evaluate the partnership at that stage and buy out the person leaving.

Again does this differ to the situation if a person was to pull out of a company where all 3 are equal shareholders?

thecleverone

A partnership does not have limited liability and as such the partners would be personally liable should any liable action occur.

VO

Go to a solicitor before you do anything. Whereas you may all get on brilliantly at present and you agree everything verbally who knows what lies ahead. The only partner I would have ithout a legal agreement is a dancing partner.

antoinolachtnai

Not only would you be liable for debts of the company generally, but you could end up being personally liable for something another partner did. You would certainly avoid this in a limited company.

If you decide to split, you might need to buy out the other people in the business. This would entail putting a value on the business. Usually businesses build up some sort of value. Even a name, an order book or even a list of contacts who regularly deal with the company as customers and suppliers has value.

JoeTurner

As the previous posters have said I'd definitely avoid the partnership scenario - you won't have limited liability and could be liable for mistakes made by the others. A lot of people go into business in good faith saying "it's grand, we're all mates etc" but sometimes, even with the best intentions, things don't work out and business partners fall out....

A better option, without knowing the exact circumstances of your business, might be a limited company where you all have an equal number of shares but with the safety net of limited liability. A limited company can also be a more tax efficient vehicle for extracting profits from the business....