A partnership is a form of organisation in which two or more people come together to carry on a business, trade or other activity. There are two forms of partnership in the UK, traditional unincorporated partnerships and limited liability partnerships (LLP).
In Scotland, the partnership (or 'firm') is a legal personality distinct from the persons who are memebrs of it. Individual partners can be held liable for the debt of the firm. Partnership property may be held by all the partners jointly or may be owned by the partnership itself. As the firm is a separate legal personality , partnerships may sue and be sued in the firm's name.
In a traditional unincorporated partnership, your business partner (or partners) and yourself are personally responsible for the business. This includes the sharing of profits as well as assuming liability for bills for goods and services purchased for your business and any losses the business makes.
Unincorporated partnerships are not required to be registered at Companies House and have no obligations to maintain statutory records, prepare and file statutory accounts or to submit an annual return to the Registrar of Companies. However, the partnership must submit a tax return every year.
LLPs are a vehicle used by businesses whose partners do not want to assume personal responsibility for their business losses. Partners’ responsibilities and share of the profits are set out in an LLP agreement. If the business runs up debts, the liability of partners is limited to the amount of money they have invested in the business. (This kind of partnership structure is usually found within firms of solicitors, surveyors and accountants; although in recent years some practices within these professions have changed their status to an LLP).
LLPs are incorporated at Companies House, have a registered office and as their name suggests, enjoy the protections of limited liability.
The partnership must send a partnership Self Assessment tax return to HMRC.
Whether an unincorporated partnership or an LLP all the partners must:
- send a personal Self Assessment tax return every year
- pay Income Tax on their share of the partnership’s profits
- pay National Insurance
All partnerships must register for VAT if you expect its takings to be more than £82,000 a year.
If you are a partner in a business experiencing financial challenges we are able to offer the following services:
- HMRC Aggressive Tax Planning Claims
- Business Debt Arrangement Scheme
- Protected Trust Deeds
Debt advice for business partnerships in Glasgow and Edinburgh
We understand that facing up to financial challenges can be an extremely difficult and stressful time. However, you should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to improve your situation.
For further information on our debt advice service for business partnerships, contact us today at an office near you.