weird advice from sba

knickersinatwist

Hi all. A newbie here. Had advice from a small busines adviser to set up as sole trader as "the tax paperwork is easier". Am now wondering whether it was a good idea as i am really setting up in business with a friend. We will be using one bank account for the business and will be receiving invoices addressed to one business name. Have filled in cwf1 with hmrc. Now think i need to notify them we are partners not sole traders. We have barely started trading but have been going since 18th april. Will we get into bother if we change now? Do we need to reg with companies house as a partnership with a turnover of approx 25k pa. Any advice appreciated x:rotfl:

Savvy_Sue

Did the sba give you bad advice, or did you not properly explain what you were intending to do?

In any event, the only thing you register at Companies House is a limited company, and a partnership isn't one of them. If you are setting up a ltd co then the paperwork is more complex.

If you are in fact a partnership then as well as your individual returns you also have to do a partnership return to HMRC.

Have you had a proper partnership agreement drawn up by a solicitor? If not, I'd get one ASAP, ie before you need it because one of you wants out and feels they are owed more than the other wants to pay. Yes, you will have to pay for it, but you can't afford NOT to do so.

knickersinatwist

Thanks for getting back to me. We did explain that we would be working together. I think he was trying to suggest ways to make things eadier as neither of us is experienced in accounting for business. But the more ive looked into things the more complicated it would appear to be - being registered as sole teaders when in fact we are partners. What do i do about hmrc? Weve only just sent off our reg for self assessment in cwf 1

colino

First thing to do is phone your business adviser and clarify their thoughts. If they genuinely mean that two newbies entering a single business operation should individually trade as sole traders - get a new business adviser.
Even with lifelong friends, shared (initial) business views and even legal agreements, they often end in expensive tears when partners feel cheated, they're doing the lions share of the work or differing business views. It can and will happen, so don't go by this (retired business managers?) "advice".

paddyrg

You absolutely 100% need a partners agreement right now before there's real money involved - MONEY CHANGES EVERYTHING. Best friends can fall out really quickly when money is involved. The agreement is a document to decide between you in peacetime what will happen in time of war - for instance what happens if one of you is ill, dies, wants a holiday, does more work than the other, wants out, wants to sell, etc. It may feel like you'll just 'work it out when it happens' now, but how would you feel if say £20k was at stake? £50k? Get that agreement NOW!!

Mattygroves2

Some guidance on registering a partnership for tax here:

https://www.gov.uk/set-up-business-partnership

You would have had to register as self employed anyway and file your personal tax return as well as a partnership one so what you've done so far is OK.

Get yourself a partnership agreement though and make sure your invoices and paperwork are legal with all names etc on them.

knickersinatwist

Thanks everyone. Spoke to bank business adviser and our acct today and have put things in motion for partnership. Feel so much happier now. We wont be going back to that sba. Or should i say sob but there u go u live n learn. Thanks again everyone. Was in such a panic over it yesterday x

Savvy_Sue

At the risk of banging on about this, have you set in motion plans to consult a solicitor and get a proper legal partnership agreement in place? You can't rely on whatever the bank provides for free.

Mistral001

The OP has not said whether the partnership is 50/50 or notHaving a 50/50 partnership is not always a good idea. In other words there is a senior partner and a junior partner. Most partnerships which have lasted the test of time in my experience have not been 50/50 partnerships.

knickersinatwist

We booked ab appt at our own solicitors on t wY out of the bank. We weill discuss terms with her. Tha ks again everyone has hwlped put my mind at ease x