In Part I we looked at the option of starting up a business as a Sole Trader. In this second of three articles we now look at Partnerships and whether this may be the most attractive form of Self-Employment for Start-up businesses.
A Partnership is formed when two or more people join together to engage in an economic enterprise. It can be seen as a number of Sole Traders joining together to start a business. It is usually defined by a partnership agreement that sets out such items as the number of partners, the percentage of the partnership owned by each person and various other rules by which the partners should abide. We would recommend that you find a solicitor who can draw up a Partnership Agreement for you as it is a very important document. It should be stressed that a Partnership is NOT a Limited Company and each partner is jointly and severally liable for the debts of the Partnership. In other words, if a partner accumulates debts on behalf of the partnership and is unable to repay them, then all other partners are liable for these debts.
The main advantage of a Partnership is that it removes the fear of “going it alone” that worries many would be entrepreneurs. For example, if you are a mechanic and would like to set up in conjunction with a friend/ former work colleague, Partnership could be a structure to allow you to start up a business together. You would register the partnership with both the CRO and the Revenue (using a TR1 form, similar to a Sole Trader) The administration costs are lower than for a Limited Company and there are less regulatory requirements. However these lower costs need to be balanced against the greater risk to which a partner will be exposed. We would advise that you speak to a professional adviser to ensure that you understand both sides of the debate and can make an informed decision.
In Part III we will look at the final option available to business start-ups, the formation of a Limited Company. In the meantime if you have any questions, please don’t hesitate to contact the office.
Contrary to what many people might think, there are still significant numbers of people setting up new business ventures. For example, in the week ending March 30th, CRO statistics show that 335 Limited Companies were formed and 254 Business Names were registered. Whilst this is much less than was the case in, say 2007, it nonetheless indicates that there are many people out there who are either making the leap to self-employment or that there are self-employed people setting up new ventures.
No, this is not an article about motor maintenance; however, maintaining your accounting system is similar to changing the oil in your car. In short, if you don’t maintain them both, they will cost you more money in the long run. Why? I hear you ask. Well, it’s simple. As the oil becomes old and more water like, the lubrication is less effective and the engine wears prematurely as a result. The same could be said for your accounting system. If your books of accounts are not maintained, they will cost you more in the long term especially if used for management accounting purposes.
For example, we were recently approached by a lady who had been successfully running her company for the previous twelve months and needed her accounts filed. Her bookkeeping was completed by her husband. “Everything is complete”, she said. “All you need to do is sign and file the accounts with the Companies Registration Office.” Nothing could have been further from the truth. We received the ‘shoe box’ of receipts along with a folder of bank statements, minus two months! As for the accounts, well let’s just say that unfortunately the Companies Registration Office don’t accept multiple sheets of handwritten notes with figures! After reviewing the file we quickly came to the conclusion that the only way to proceed was to start the whole job again. Of course, this work has to be reflected in the price, much to the consternation of the client who believed that “everything is complete”.
In summary, the point that I’m trying to make is, don’t waste your time trying to cut corners on accounting fees, as it really is a waste of time! It also leads you into a false sense of security, thinking that everything is fine when, in some cases it’s not!