Setting Up A Business Partnership

Barney_McGrew

Hi, my mate and I are in the process of trying to set up a small business cleaning windows, gutters etc. This is going to be a part time job we can do around our shifts. We are putting in the same amount to get us started but have been advised to get a partnership agreement written up by our accountant. My question is, if we dont get any type of agreement done by a solicitor, could one of us take out loans through the business without the other knowing, thus meaning both of us would be personally liable for the debt? As I said, I dont have any concerns about the business running up any kind of debt, but we both need to protect ourselves against something like the situation Ive mentioned. If that scenario is possible, would people receommend setting up a Ltd Company or a partnership but with an agreement in place?

Pennywise

Even with a partnership agreement, each partner remains legally liable for business debts that the other incurs as it only applies to eachother, not third parties. So initially the "innocent" partner is liable for the debt, and then has to reclaim from the "guilty" partner through normal legal processes. If you have any doubt at all, don't go down the partnership route. At least with a limited company, it's the company that's liable not you personally, so your personal assets aren't at risk.

Barney_McGrew

Pennywise wrote: »

Even with a partnership agreement, each partner remains legally liable for business debts that the other incurs as it only applies to eachother, not third parties. So initially the "innocent" partner is liable for the debt, and then has to reclaim from the "guilty" partner through normal legal processes. If you have any doubt at all, don't go down the partnership route. At least with a limited company, it's the company that's liable not you personally, so your personal assets aren't at risk.

Thanks. Would it even be possible though for a partner to borrow debt through company without the other knowing? How much extra would it cost to run a Ltd Company per annum? The accountant we seen reckoned it would cost around £700 pa to sort out books for a Ltd Company as opposed to about £300 for a partnership. Since we are only going to be earn part time wages from it, were obviously keen to keep the costs as low as we can.

paddyrg

Forget the partnership - just both work and find each other jobs to balance things out and cover holidays. You're in a mostly cash sector, and your customers don't give two hoots which company cleans their windows. Don't make things complicated if they don't need to be.

bris

You clean windows you get paid, why complicate things in a cash business?

paddyrg

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