According to the Office for National Statistics in a study of UK private sector businesses, at the beginning of 2021 there were 384,000 ordinary partnerships in operation, so it’s of no surprise to us that you’ve found yourself here!

Considering going into business with a partner, but unsure where to start? In this article we explain the things you might want to consider before setting up, and if you’ve concluded this is the right structure for you, how to get started.

Things to consider before going into Partnership:

• Finding the right partner/s – Of course, a partnership requires at least two people. One of the advantages of going into a partnership is the shared workload, so finding someone with skills, experience and knowledge that’ll complement yours or fill in the gaps is invaluable. Ask yourself these questions; can they communicate effectively? Do they share the same goals for the business as you? Are they trustworthy, committed and financially stable?
• Do you need a partner or an employee? – Sharing responsibility, workload and ideas are a big draw, with some finding the idea of having someone to bounce ideas off very appealing as opposed to working alone. It’s important to consider the purpose of having a partner – could you get what you need from an employee or a consultant without sharing your profits or your business?
• Choosing the right partnership structure – There are different structures of partnerships to choose from; the ordinary (or ‘general’) partnership; the limited liability partnership (LLP); and the limited partnership. Each with different features and rules, so the one suited best to you and your partner/s will depend on your circumstances. Our guide to the different types of partnerships explains each, with the pros and cons for each scenario to help you decide.

Ready to set up your Partnership? Here’s where to start…

If you’ve established that you’re ready to go into partnership, then how you set up does vary on the structure you’re going for, broken down as below.

Setting up an Ordinary Partnership

Choose a name for your Ordinary Partnership:

• You can either choose a business name, or trade under your own personal names.
• To protect the name from being used by other people trading you should register the name as a trademark, and you cannot use a name that already has a trademark against it.
• You cannot use an offensive name, or one that alludes to involvement with local authority or government unless you have prior permission.
• You cannot use the word Limited or LLP

Assign one of the partners to be a nominated partner – in an Ordinary Partnership there must be one individual given the title of nominated partner, with the responsibility for keeping business records and managing the partnership tax affairs.

Register the partnership with HMRC – the nominated partner must register the partnership for self-assessment with HMRC in order to submit partnership tax returns.

Register for self-assessment as individuals – in addition to the above, each partner must also register themselves with HMRC for self-assessment to submit tax returns for themselves.

Create a Partnership Agreement – It is highly recommended to create a Partnership Agreement – this will set out each partner’s roles and responsibilities, including their level of investment and how the profits and assets of the business will be divided. Additionally, it will set out plans for what happens to the business should one partner resign, retire or die – if you do not have a Partnership Agreement in place, the rules governed by The Partnership Act 1890 will be applied – which means that should this happen then the business would dissolve.

Setting up a Limited Partnership

Choosing a Limited Partnership name – The same guidance and rules apply as per ordinary partnership, but this time, where you will have a business name, you must not use the words public limited company, PLC, Limited liability partnership OR LLP.

Assign at least one General Partner and one Limited Partner – one partner cannot do both roles, each having different responsibilities and liabilities.

Register your Limited Partnership with Companies House – this is via a paper form, more details can be found here: Apply for registration of a limited partnership. You’ll also need to confirm at this stage the partnership’s registered office address – remembering that this will be publicly available on the Companies House register.

Register for self-assessment – As with the Ordinary Partnership, every partner is responsible for registering themselves for self-assessment. The General Partner will also need to register the partnership for self-assessment.

Create a partnership agreement – see details in ordinary partnership which also apply here.

Setting up an LLP

Choosing a Limited Liability Partnership (LLP) name – An LLP name must not be the same as another Ltd company, and also needs to have ‘LLP’ or ‘Limited Liability Partnership’ at the end. HMRC have further guidance here on choosing a name.

Assign Partner responsibilities – in an LLP the partners are also called ‘members’. Along with any number of Ordinary members, there must be at least two designated members who will have certain legal obligations and more responsibility than ordinary members such as registering the business for VAT (once it reaches the threshold) along with Companies House filings such as annual accounts and confirmation statements.

Create an LLP agreement – this will outline all member’s responsibilities include decision making as well as such things as how profits will be distributed.

Register your LLP with Companies House – Just as with a Limited Partnership above, you’ll need to confirm your partnership’s registered office address when registering. For this type, there are three different ways to register: via a paper form in the post, online via certain software, or via a formation agent.

Register for Self Assessment – every member must register themselves for self assessment with HMRC.

Register the LLP for self assessment with HMRC – this is the responsibility of the designated member/s.

How can Integro Accounting help?

Here at Integro, we offer bespoke accountancy packages covering all the tax needs of both yourself and your partnership, including tax returns, accounts submission and much more. Head over to our services page to view our accountancy packages for Partnerships and SME’s, or feel free to submit a call back request if you’d like to learn more about how we can help you.