Registering e-commerce site w with HMRC - sole trader or partnership - please help!

alexanderstuart

Hi there,

So me and my partner have recently set up an online business. We've been trading for around six weeks, but luckily have currently made around £13,000 revenue and £6,000 next profit, so I know we need to submit a self-assessment tax return.

We both work full-time alongside this online business, we don't intend on quitting our jobs and taking this full-time, but we're putting our profit towards a house deposit.

My question is this:

I currently earn 30k pre tax, my partner earns 30k base salary, and then commission on top which can range from 10-15k a year. My partner creates the products, and I do the website design, marketing, accounting etc. Do we both HAVE to register and do this self-assessment  as a partnership, or can I put it all in my name as a sole trader? We don't expect our revenue to be the same month on month, we launched a PR campaign that drove a lot of our sales and traffic.

Any help would be appreciated - we don't wish to pay for an accountant, everything has been done from a separate account so I'm more than happy to file this return myself - I just don't want to get into any trouble registering as a sole trader when we both contribute to the business!

Thanks!

Savvy_Sue

You may not wish to pay for an accountant, but nevertheless it might be worthwhile. 

for one thing, setting up a formal partnership might be a good thing to do, because while you and your partner might be happy at the moment with all the profit going into your name, what happens if you fall out or split up? A partnership agreement now setting out what happens if you want to end the partnership will be worth its weight in gold, and the time to write it is well before that situation arises. 

Although be warned, a partnership will necessitate three tax returns: one for each of you as individuals, and one for the partnership itself. 

oldbikebloke

your "partner" may be an employee legally required to be paid minimum wage in return for their input unless there is a formally constituted partnership agreement in place 

Pennywise

How are you proposing to pay "your partner" their share of the profits if you don't set it up as a partnership?
In whose name is the business at the moment, i.e. in whose name is the domain names, credit card/paypal account, etc.  You may well have already set up a partnership by your actions to date. 
As said above, a partnership needs 3 tax returns.

Savvy_Sue

I always find it immensely reassuring when people whose posts indicate that they know a lot more about this kind of thing than I do seem to agree with my initial musings ... 

Phil&Michelle

You might be better off putting in your name if she is due a big bonus, if your base salary is 30K for your employed income and then another £6k self-employed that would be £36k, if your partner also earns £30k plus a bonus of £10-15K if she then added self-employment on top it could push her into higher rate tax bracket. My husband works full time and helps me out with my self employed business for free.

General_Grant

oldbikebloke said:

your "partner" may be an employee legally required to be paid minimum wage in return for their input unless there is a formally constituted partnership agreement in place 

May not be required to be paid national living wage if considered to be "family" in same accommodation.