The Merits of Partnerships

Plenty of businesses reach for a limited company without stopping to ask whether it’s the right fit. For many, it is. But a partnership or an LLP can be more flexible and less bureaucratic to run, and in the right circumstances it can work out more tax-efficient too. It’s worth understanding the options before you commit.

Why a partnership or an LLP might suit you

Set up well, a partnership or an LLP gives you room to shape the business around what the people in it actually want. Depending on your circumstances, the benefits can include:

• Flexibility to build the arrangement around what you’ve agreed, including capital contributions, profit shares and who’s responsible for what
• Shared skills, contacts and investment, so partners can pool what they each bring to the business
• Limited liability, if you take the LLP route, without losing the collaborative feel of a partnership
• Room for commercial and tax planning, including efficient profit allocation, depending on the business and the people in it
• A clear framework for governance and succession, set out in the agreement, covering how decisions get made and what happens when someone joins, retires or leaves

For some businesses there’s a further tax angle. A partnership can be an efficient structure where profits sit below the higher-rate income tax threshold, and for property businesses there can be Stamp Duty Land Tax rules that help with holding and passing on a portfolio over time. Whether either applies to you depends on your circumstances, so it’s worth taking advice before you rely on it.

Getting the arrangement right

The arrangements you settle at the start have a long reach, shaping control, profit share, liability and succession well into the future. They’re worth getting right, and worth revisiting as the business grows and changes. We can help you:

• Set up a new partnership or LLP, or review one that’s already running
• Prepare or update the partnership or LLP members’ agreement
• Sort out governance, decision-making and how profits are shared
• Convert an existing partnership to an LLP
• Work through issues between partners or members as things change

The right structure won’t make the business, but the wrong one can hold it back for years.