This is the second of third blog covering the area of which would be most appropriate business structure for you. The first blog covered limited company structure. This blog cover the partnership structure. The third and final blog will cover sole trader structure.

Partnership

A partnership is two or more people carrying on business together with a view to making profit.

The partners are all joint and severally liable for partnership debts, although this does not apply to personal tax bills based on partnership profits.

It is advisable to have a partnership agreement to document the agreement between the partners. However, the partnership is often between husband and wife and there is no agreement.

Limited Liability Partnership (LLP)

LLP’s are treated like a normal partnership for tax purposes but have the protection of Limited Liability.

A LLP is a separate legal entity and can enter into contracts and deeds, sue and be sued. With normal partnerships every partner has to be party to certain documents and litigation. Floating charges can be granted over its assets in its own name, which normal partnerships can’t do. As with Limited Companies, there is public availability of accounts.

LLP

In a LLP the partners liability is limited to the amount they have invested in the business plus any personal guarantees they have given.

Partnerships (none LLP)

In partnership partners liability is not limited (their personal assets are not protected) they are joint and severally liable for partnership debts.

The procedures of setting up a Partnership and LLP are well explained by the Business Link -http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1073789611 .

Dissolving a Partnership is straightforward – paying all your creditors and informing HMRC. There is a formal process of dissolving LLP: http://www.companieshouse.gov.uk/about/gbhtml/gpllp3.shtml#ch1