getting into partnership

refco

two lads in the same trade as myself have approached me to consider a partnership with them in considering this i am going to take legal advice but just before i start is there questions i should be asking or any thing i should get nailed down from the off in terms and conditions with the guys before i even consider
thanks in advance for any advice

J.Ryan

Get your accountant to review their accounts.

Insist on a a partnership agreement, your solicitor will explain that.

If the business requires qualifications ensure that they have them.

What is their professional reputation, do you respect them?

Agree on work and drawings, you don't want to be working 50 hours a week with them doing 35 and all drawing the same money (I've seen it happen).

Agree on someone independent doing all the book-keeping and keep an eye on materials + hours worked to turnover produced.

and finally remember you could always be out voted 2-1 on every major decision.

dbran

Hi Refco

Partnerships should be avoided at all costs.

As a member of the partnership you are jointly and separately liable for all the debts of the partnership. This means that the other partners can run up huge debts of the partnership and you will have unlimited liability to pay them if they are unable to.

For this reason alone you should always go down the limited company route if at all possible.


Regards


dbran

betonit

do partners just take drawings during the year and then do a tax return for 31st of october. What happens to profit that is not taking in the form of drawings is it taxed at the marginal rate as if the partners were sole traders or is it taxed at the corprate rate?

ta

derekthedoggie

I know these are simple but stick to them

1.You should be working with your future partners for at least 3 years first.

2. Paranoia inevitably creeps in about what the others are doing. Give it a chance as partners who have different strengths, shine at different times. If this continues over the long time listen to your gut.

3. Agree what happens if one strand of the rope wants to leave the partnership.

Remember, you have to share the profits, but it's great to be able to share the problems.

dbran

betonit wrote: »

do partners just take drawings during the year and then do a tax return for 31st of october. What happens to profit that is not taking in the form of drawings is it taxed at the marginal rate as if the partners were sole traders or is it taxed at the corprate rate?

ta

As partners you are assessed on your share of profit alone. Drawings is not relevant in this regard. If you take out more drawings then profit then you technically owe this money back to the partnership as you have not earned it. conversely if you have not taken enough drawings then you are owed money from the partnership.

dbran

betonit

dbran wrote: »

As partners you are assessed on your share of profit alone. Drawings is not relevant in this regard. If you take out more drawings then profit then you technically owe this money back to the partnership as you have not earned it. conversely if you have not taken enough drawings then you are owed money from the partnership.

dbran

Thanks.... Whats the xtra income over profit classed as for tax purposes, a loan? Is there benefit in kind associated if theres no interest charged or is it just income. Couldnt partners take out loans for the co. and just dip into it if they ar eonly taxed on profits? (not condoning this but could see it some people do this)

Is there any way a parnterships can hold back profits so to have cash available to them or is it all taxed as if they were sole traders? If not if a partnership is successful theyre just better off forming a comapnay?

Thanks again.

BlackEdelweiss

As a successful business man said to me once, "Partners are for dancing!"