A partnership is defined as being two or more persons (partners) engaging in business together with a view to make profit – this is sometimes referred to as a ‘strategic alliance’. The partnership is an entity legally separate from the partners themselves.
For tax purposes, your partnership is treaded similarly to a sole trader because you will be self-employed. You would also own all the assets of this partnership, which means you have unlimited liability. Accountants Super and Tax has comprehensive strategies to help you determine the ways to minimise these risks. Depending on your type of business, we may also need to help you obtain certain licences.
In a general partnership, however, profits and losses flow through to the partners’ tax returns.
Benefits of a partnership
- Business is easy to establish and start-up costs are low
- More capital is available for the business
- Greater borrowing capacity
- High-calibre employees can be made partners
- More opportunities for tax planning (such as income splitting between family members) than that of a sole trader
- Relatively easy to dissolve the partnership or to resign and recover your share
- Partners are not employees. Superannuation contributions and workers’ compensation insurance are not payable for partners
- Partners’ business affairs are private
- Limited external regulation