Business Formation 2 – Partnerships

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.

VAT 3 Returns

All VAT Registered persons, whether they are Sole traders, Partnerships or Limited Companies and who are required to submit a VAT Return for the period 1st January 2011 to February 28th 2011 (VAT 3 Form) have until March 19th to submit this return.

This VAT Return details the VAT charged on their Sales (Output VAT) and the VAT paid on their Purchases (Input VAT). They are also required to disclose the amount of Sales of Goods to other EU countries, together with Purchases from Other EU countries.

By subtracting the Input VAT from the Input VAT, the amount of VAT to be paid/ refunded is calculated. This payment must be made by March 19th. In the event of a repayment, there is an option to have the amount refunded to your bank account or to have it offset against other Tax Liabilities, e.g. Employers Returns (P30).

Depending on a taxpayers circumstances this is often a good idea as by leaving money ‘on account’, it will reduce future liabilities. For example, if you are an Employer and you often struggle to make your P30 payment it may be a good idea to request the Revenue Commissioners allocate a VAT refund to your future PREM liability.

If you have any queries, please don’t hesitate to contact the office and we will be happy to advise you. All our staff are fully qualified accountants as we don’t employ trainees. This ensures that the quality of our advice is second to none.