Partnership

tyler_d

Hi

Sorry this might seem like a silly question butI'm forming a partnership and have registered the business name with CRO. I will be under the vat threshold so I don't believe I have to register for vat. Is there anything else I have to do to make this a official business (besides declaring income at end of year)?

Aaron

Peterdalkey

You need a Partnership Agreement. You can find lots of templates online but just make sure that it is suitable for use in Ireland and is stated to be governed by Irish law. Once the partners have agreed the terms of the partnership and believe that the terms stated reflect their understanding, each should seek independent legal oversight to make sure it means what each thinks it does, before signing. It is a legal agreement, so should only be entered into with eyes wide open!

antoinolachtnai

You don't have to do anything and you don't have to have a formal partnership agreement. But trouble ahead if you don't, and possibly even if you do. Partnership law is very tricky and to be avoided. Get a lawyer's advice. He will quite likely advise you to dissolve the partnership and establish a different structure. (The problem is the unlimited liability for your partner's actions.)

Peterdalkey

There may be advantages to unlimited companies in certain corporate structures:

Some unlimited companies, unlike most limited companies, need not file accounts at the CRO; and
Unlimited companies enjoy greater flexibility than limited companies in undertaking capital reductions and in carrying out share redemptions or buy-backs.

These advantages must be weighed against the risks and dangers involved:

Members are liable (without limitation as to amount) for the company’s debts on insolvency;
Many groups seek to ring-fence any liability by ensuring that the shareholders of an unlimited company are themselves limited-liability entities. However it is always possible that a court will hold such limited-liability “buffer” companies to be a sham, will “lift the corporate veil” and look to the ultimate underlying members;
The courts enjoy powers under the Companies Act 1990 to order “related companies” (which need not necessarily be shareholders) of an insolvent unlimited company to contribute to the debts of that unlimited company;
It is particularly dangerous for an individual to be a member of an unlimited company, even in a nominee capacity; and
Former members continue to be liable for company debts for one year after ceasing to be a member. This presents issues if the unlimited company is ever sold, and can potentially complicate an exit.

tyler_d

Thank you the advice. To be honest, the business is only small (a side business really) and its between me and my girlfriend. Everything is split 50% and we don't plan to give much credit out so I was hoping a informal agreement is okay.

Peterdalkey

A simple partnership agreement will do, it is a mistake not to do so. The templates will cover the topics that need covering. As this is a business, you also need to register with Revenue. http://www.revenue.ie/en/business/running/registering-tax.html#section3

tyler_d

Thanks again. Do I need to register with revenue even if my income is below the vat threshold?

Peterdalkey

income tax has nothing to do with VAT, so the answer is yes!!

tyler_d

Hiya

Thanks again for the reply.

Sorry I didn't realise you meant income tax. I have another company and am registered for income tax. Do I have to register income tax for this new business as well? I just though at the end of the income year that I would just declare this income from the new business when my accountant asks me "Do you receive income from anywhere else?"

Peterdalkey

That is fine but it also applies to your girlfriend too!!

tyler_d

yes she is the same. Thank you for that. Appreciate the advice.