'Partnerships' - why?

James_Green_1982

Could someone explain to me why anyone would choose to form a business 'partnership' - rather than a limited company?

it seems partnership involves more risk than ltd company, so presumably there is some benefit as to why it exists?

Thanks.

Pennywise

Limited companies need their own bank account, so may cost more.

Ltd companies need separate insurance, so may cost more.

Ltd companies need more accountancy support, so may cost more.

Some trades/professions don't allow you to trade through a ltd company.

Banks may be more willing to lend to partnerships than a ltd company.

Tax relief on vehicles is very different, so for some people, tax relief is far higher with a p'ship which makes it a better option than a ltd.

Trading losses in a p'ship can be set against the partners' other income, such as wages whereas losses in a ltd can only be set against future trading profits, so are lost if the business doesn't do on to make more profit than its losses.

Partnerships can be quicker/easier to set up and close down than ltds.

Some people don't want the general public to see information re their business - p'ships are confidential whereas ltds have accounts and ownership details on public record.

Different tax rules pertaining to mobile phones, use of home, etc may swing the balance.

Those are off the top of my head, there are plenty more!

James_Green_1982

Pennywise wrote: »

Limited companies need their own bank account, so may cost more.

Ltd companies need separate insurance, so may cost more.

Ltd companies need more accountancy support, so may cost more.

Some trades/professions don't allow you to trade through a ltd company.

Banks may be more willing to lend to partnerships than a ltd company.

Tax relief on vehicles is very different, so for some people, tax relief is far higher with a p'ship which makes it a better option than a ltd.

Trading losses in a p'ship can be set against the partners' other income, such as wages whereas losses in a ltd can only be set against future trading profits, so are lost if the business doesn't do on to make more profit than its losses.

Partnerships can be quicker/easier to set up and close down than ltds.

Some people don't want the general public to see information re their business - p'ships are confidential whereas ltds have accounts and ownership details on public record.

Different tax rules pertaining to mobile phones, use of home, etc may swing the balance.

Those are off the top of my head, there are plenty more!

Thank you very much!
That is really helpful.

Can you explain why some trades are not allowed to use ltd company?
Which ones?
Thanks.

James_Green_1982

Is it true that in a partnership your personal assets are at risk - not just all the business assets (if this makes sense?!).

00ec25

James_Green_1982 wrote: »

Is it true that in a partnership your personal assets are at risk - not just all the business assets (if this makes sense?!).

2 sorts of partnership


- "partnership"
or
- "limited liability partnership" aka: "LLP"


the rest of your answer is facts you can get via google

James_Green_1982

00ec25 wrote: »

2 sorts of partnership


- "partnership"
or
- "limited liability partnership" aka: "LLP"


the rest of your answer is facts you can get via google

Thanks.
I have looked online - but only found the negative aspects of partnership - so couldn't figure out why people did it.

Pennywise

James_Green_1982 wrote: »

Thank you very much!
That is really helpful.

Can you explain why some trades are not allowed to use ltd company?
Which ones?
Thanks.

It's up to the trade/professional bodies to decide how they allow their members to trade/practice. I'm sure they have their reasons, probably to not let their members avoid personal responsibility/liability for mistakes. For the same reason, some trades/professions aren't allowed to operate as limited liability partnerships.

Some trade/professional bodies allow limited companies but require advance permission and maybe additional safeguards such as bonds, certain insurances, etc.

James_Green_1982

Pennywise wrote: »

It's up to the trade/professional bodies to decide how they allow their members to trade/practice. I'm sure they have their reasons, probably to not let their members avoid personal responsibility/liability for mistakes. For the same reason, some trades/professions aren't allowed to operate as limited liability partnerships.

Some trade/professional bodies allow limited companies but require advance permission and maybe additional safeguards such as bonds, certain insurances, etc.

Thank you again.

Presumably it's possible for a client / customer to sue such a professional personally (eg for negligence etc) even if they are working through a limited company?

ie Does the limited company only protect against contractual liability? eg If a customer makes payment to a limited company plumber, they can only sue the limited company for payment disputes - but if the plumber causes a gas explosion through negligence he can be personally liable?

bris

James_Green_1982 wrote: »

Thank you again.

Presumably it's possible for a client / customer to sue such a professional personally (eg for negligence etc) even if they are working through a limited company?

ie Does the limited company only protect against contractual liability? eg If a customer makes payment to a limited company plumber, they can only sue the limited company for payment disputes - but if the plumber causes a gas explosion through negligence he can be personally liable?

No the LTD co are liable financially. The employee will be liable along with the company criminally but not financially so you cant sue an employee.

James_Green_1982

bris wrote: »

No the LTD co are liable financially. The employee will be liable along with the company criminally but not financially so you cant sue an employee.

Thanks. I didn't realise that.
I thought litigants usually went for the employer - because that's where the money usually is.
But with a small business it's more likely the employee would have more assets than the business.
I know many employees need their own indemnity insurance - but I thought that was just in case the employer managed to get out of the responsibility and shift blame onto the employee directly.

Mistral001

James_Green_1982 wrote: »

I know many employees need their own indemnity insurance - but I thought that was just in case the employer managed to get out of the responsibility and shift blame onto the employee directly.

Are you sure they are employees and not self-employed contractors?

As has been said employers will be responsible for any mistake that a employee makes unless it involve criminality. Some unions will take out insurance for their members but that obviously is only in connection with criminal offences and even then it is only for legal representation - they cannot pay their fines.