Sitting in front of a potential new client this week, I was reminded how sometimes…
A partnership is created when two or more individuals come together to form a business. Partnerships can be a great way to run a business and using one as a trading vehicle can result in some significant tax savings.
However, a partnership needs to be created properly and should not be entered into lightly. If your partner should go bust then you could easily find that you are “jointly and severally” liable for each others debts….ouch!! That being the case, you need to be very careful who you choose as your business partner.
What can go wrong and how to prevent it happening to you
Apart from going bust, he main issue with partnerships occurs when relations between partners start to break down. This could be because one partner thinks they do more within the business than the other but still takes an equal profit share, or it could be that life partners have entered into a business together and their life partnership breaks down. Either way, each partner needs to be clear of their obligations.
The easiest way to achieve this is through the introduction of a written partnership agreement. This document, which can be drawn up by a good corporate solicitor, will lay out the responsibilities and obligations of each partner, so, if the worst should happen, there is something to fall back on which explains the steps to be taken in such a case.
Don’t leave it to chance – make sure you are covered!