| “Should I choose a Partnership, Limited Company | | | | means you would not have to worry about the |
| for my new business? And what on earth is a Limited | | | | financial status of your personal belongings becoming |
| Liability Partnership?” | | | | the subject of the liquidator’s interest. |
| There are similarities and differences between private | | | | LLPs and companies are quite similar and both give |
| companies limited by shares and partnerships and | | | | limited liabilities to the company founders and officers |
| limited liability partnerships. | | | | as explained above. Companies also have a separate |
| Any person wanting to set up a business needs to | | | | legal personality - the registered entity itself. In |
| appreciate this before they decide to choose a | | | | addition there are registration formalities of |
| business medium. The choice can have a real bearing | | | | businesses formation for a limited company including |
| on how successful the business will be because one | | | | documents that are required to be filed with |
| trading style may be much more suitable for a | | | | Companies House. Although they are similar they way |
| particular enterprise or the businessperson’s | | | | they are owned and managed is quite different – |
| particular circumstances. | | | | for example companies must have a Memorandum of |
| When helping clients make such important decisions | | | | Association and Articles of Association, and certain |
| solicitors will usually advise their client on the | | | | legal duties of company officers can even attract |
| implications of running that particular business. Usually | | | | criminal penalties if badly performed! |
| you can decide on which would be best for you by | | | | From a taxation perspective, the following would be |
| understanding the advantages and disadvantages of | | | | the consequences of running a partnership: Each |
| the choice you make. | | | | partner would be liable to pay income tax based on |
| You would need to be able to differentiate the | | | | their profit share in each tax year. Whenever any |
| nature and formation procedures that would be | | | | partnership asset is disposed for a gain, therefore a |
| necessary. Another element to focus on would be to | | | | partner will incur capital gains tax liability in respect of |
| gain an understanding on the taxation considerations | | | | their share. All of this means partners are always |
| involved. | | | | treated as individuals for tax purposes. |
| A Partnership is a legal entity where the members | | | | The advantage of using as private limited company |
| are personally liable for the debts of the business | | | | than a LLP is usually the method that is used for |
| – just as you are when you take out a loan from | | | | transferring any ownership. This is because the ability |
| the bank. It is the simplest business arrangement | | | | to transfer title to shares using a shock transfer |
| – but even this needs careful planning. Wise | | | | form is generally more straightforward than doing so |
| business people never enter into such arrangements | | | | using a LLP. Members of an LLP owe a fiduciary duty |
| without a Partnership Agreement. | | | | towards the LLP. |
| There’s much to say on the benefits of a | | | | Both companies and LLPs have an obligation to |
| Partnership Agreement which is beyond the scope of | | | | notify Companies House of any changes to the |
| his particular article – but if one is not written the | | | | executive membership in their annual return |
| Partnership Act 1890 decides on the outcomes of | | | | paperwork, rather than as the events occur. |
| any disagreements or issues. This can have very | | | | The retirement of a member from a LLP |
| different and catastrophic consequences to those | | | | automatically dissolves it - unless otherwise stated in |
| envisaged by the partners when first setting up. | | | | the Membership Agreement. This is a similar situation |
| Obviously your solicitor can help you draft a | | | | to straightforward partnerships. Again it highlights the |
| watertight agreement to protect your valuable | | | | wisdom of having a professional Partnership |
| investment – and we’d recommend Harvey | | | | Agreement or Membership Agreement drawn up. |
| McKibbin Solicitors because they have a great track | | | | By now you may be a little more informed about |
| record in doing this kind of work. | | | | these issues – but as you can also see there |
| A limited liability partnership is a body with a legal | | | | are a huge number of considerations that need to be |
| personality separate from that of its members this | | | | mulled over make before deciding on which choice of |
| means that if your business faced overwhelming | | | | business medium is right for you! |
| financial strain then you would not be personally held | | | | Of course, you solicitor can help – you can try a |
| liable for the businesses debts. It is a safe approach | | | | firm with a great reputation like Harvey McKibbin or |
| to prevent your personal possessions from being sold | | | | you can use the Law Society website to find out |
| because your business has not been successful. This | | | | more. |