Remain as Sole traders or register as Partnership

pgardiner

Hi all, myself and my brother-in-law both work together, self employed as window cleaners. We both decided to work together from the beginning and we both came up with our business' name. We have a van with the business name on the side and have matching apparel with the business name on. However, we have both, individually, registered as sole traders with HMRC.

All the profits are being split 50-50 and we do our tax returns/report our earnings to HMRC separately, as individuals.


After doing a little research online it would appear that registering as a Liability Limited Partnership is definitely not beneficial to us considering the size of our business. I have also seen something called an "Unregistered Partnership" or "General Partnership" where you register as a partnership (without all the legal stuff and procedures etc) and when you come to filing your tax returns, you submit one for the business and you also submit individual tax returns. However, when I have looked on the GOV website, you can only register as LLP or Limited Partnership; both require lots procedures and being registered on Companies House, which we have no interest in doing.


So, my question here is... Is there any benefit to registering as a General Partnership? To me it seems far simpler to remain as sole traders but working together. By working together as sole traders are we breaking any laws?

Savvy_Sue

Do you have an accountant to help with the tax returns? If you do, I'd take their advice. If you don't, it may be worth talking to one. Or more. 

I don't know about the rest of it, but one reason to form some kind of partnership is to deal with the 'what if?' questions. What if one of you want to get out of the business, and the other doesn't? Whatever you do, don't make it a 50:50 split - you can easily get into a deadlock situation ... 

Mistral001

You are already in a partnership and even though the partnership agreement is only verbal, a legally binding partnership has been formed.  Many people although get a partnership agreement drawn up by a solicitor or accountant which, as Sue has said, can be very useful if there is a disagreement between the partners or if one of the partners wants to go their separate way.

As for tax, if you do decide to get a formal partnership agreement drawn up, nothing much will change.  You will both be treated as self-employed and will have to submit separate self-employment tax returns.

Pennywise

As said above, you're already a partnership and should be submitting a partnership tax return and declaring partnership profit shares on your individual tax returns.  You can't just halve the profits and put each half down as self employment/sole trader.  What is the business turnover - I hope it's not over the VAT threshold?