A partnership is an extension of being a sole trader and therefore most of the sole trader guide will also apply to partnerships. In a partnership, a group of two or more people will come together, pool their talents, clients and business contacts so that, collectively, they can build a more successful business than they would individually.
The partners will agree to share the joint profits in pre-determined percentages. It is advisable to draw up a Partnership Agreement which sets the rules of how the partners will work together. Partners are taxed in the same way as sole traders, but only on their own share of the partnership profits. As with sole traders, the partners are legally liable to pay the debts of the business. Each partner is ‘jointly and severally’ liable for the partnership debts, so that if certain partners are unable to pay their share of the partnership debts then those debts can fall on the other partners.
The business must submit a
Partnership Tax Return each year which will include details from the accounts.
In addition each partner must also submit an annual Self Assessment Return.