Partnership of part of a business???

Jacka87

Added this to my last post and not got any responses so just giving it its own post.

My father is planning on slimlining his business as he is planning on taking it easier as opposed to taking early retirement. To give you an idea, the business is mostly retail, but has a little wholesale section. However it is now looking at setting up an online retail section, which is expansion of the business but he feels this would be an easy part to run as almost full retirement later.

I was considering running the online retail section and as a result would be looking at a 50-50 split on the profits with my dad. Its running under his name but I would be doing all the work. So he would essentially be a silent partner. However would it have to be part of his whole business or could it be a seperate company?

If it was part of his business would I need to be a partner in the whole company, if it was a seperate 'sister' company then I could just be involved through the online business?

Also does a partnership work like a sole trader only with the profits being split and each partner paying tax on there half?

The business is currently only run as a sole trader in my dads name, if thats important.

Thanks in advance.

fengirl_2

He can set the online venture up as a separate business, or as a partnership with you, or as a separate business with you as an employee, or keep it as part of his exisitng business. I think he needs to take advice from his accountant as with his retirement coming up, there are issues over pensions and possible benefits to take into account, as well as both your tax liabilities.

tyllwyd

My first advice would be to talk to a solicitor before you do anything, to make sure that you understand all the pros & cons of forming a partnership, as opposed to a limited liability partnership or a limited company. You need to consider the tax implications, and also your liability for debts of the partnership.

My understanding is that partners pay tax on their own share of the partnership profits. It is a good idea to draw up a partnership deed to make it clear what terms you are agreeing between the two of you.

I can't see any reason why you couldn't separate off the online side of the business from the rest of it, but you'd need to think it all through carefully and make sure it's done properly - again, I'd have said professional advice is essential. If you are only running the online side of the business, but you are in a partnership with your dad, I'd be very careful that if the rest of the business went under, you don't end up responsible for his debts.

Jacka87

I have just read up on Limited Liability Partnerships (LLP's). I cant see any reason why it would be a good option for me and my father as it would limit the worry of my personal finances costing him as he is starting to plan for retirement and it also gives me the security of knowing that if the new business fails it will not damage my own finances.

The only con I can see is the need to publish accounts, could somebody tell me how much work/expense there is in doing this? And is there any other real concerns with doing this that I dont seem to be picking up, as it seems like its much better than a normal partnership in nearly every way?

tyllwyd

I don't think you should worry too much about the cost of filing accounts for a small limited liability partnership - Companies House fees are here
http://www.companieshouse.gov.uk/toolsToHelp/productPriceListCompare.shtml

and you will need to pay an accountant, but I don't imagine it will cost more to do your accounts as a limited liability partnership than as a partnership. If your dad already has an accountant, you could have a chat with them about costs & pros & cons.

Jacka87

Thanks tyllwyd,

He does already have an accountant so we will speak to them. I was just thinking there must have been some sort of reason why people would not use the LLP as opposed to the normal partnership arrangement.

tyllwyd

Well, LLPs haven't been around for all that long in this country - less than 10 years. And it seems that in a lot of ways they are more like companies than ordinary partnerships. If you have a look, you will see that quite a few of the big firms of accountants/solicitors have converted from partnerships to limited liability partnerships (they aren't allowed to become limited liability companies).

Jacka87

Thanks again,

well it does seem to me that llp is the best way forward but will speak to my father & his accountant, we will see how we proceed.