Do I need to register a business partnership?
A business partnership has a similar structure to that of a sole trader. Whereas a sole trader has sole responsibility for any costs and financial losses the business may incur, a business partnership has a shared responsibility for any costs and financial losses.
Not all partners in the business partnership need to be sole traders, they can be limited companies also. Irrespective of the business structure of each partner, profits are shared between all partners with each partner being responsible for applicable taxes on their own share.
In order to register as a business partnership, you must:
- Choose a business name for your partnership. You can trade under your own names, or you can choose another name for your business.
- Choose a ‘nominated partner’ who is responsible for registering the partnership with HMRC, keeping business records (income and expenses) and sending annual tax returns of the partnership. Other partners must complete their own individual tax returns, either through self-assessment (as a sole trader) or corporation tax (as a limited company).
- Register the partnership with HMRC. You can register a partner or partnership online or by completing a SA400 form (registration of a partnership) or a SA401 form (registration of a partner).
- Include your name(s) and business name (if you choose to use one) on all official paperwork (such as invoices, letterheads, etc)
- Register for VAT if you have turnover of £85,000 over a 12 month period (i.e. money generated from sales and services).
Does a business partnership need to register a business name?
A business partnership does not need to register a business name – you can trade under your own names. Should you wish to choose a business name for the partnership it must not:
- include ‘limited’, ‘Ltd’, ‘limited liability partnership, ‘LLP’, ‘public limited company’ or ‘plc’
- be offensive
- Will need permission if your name contains a ‘sensitive’ word or expression, or suggests a connection with government or local authorities. For example, to use ‘Accredited’ in your business name, you need permission from the Department for Business and Trade (DBT).
- Be the same as an existing trademark
If you decide to use a business name for your business partnership you should check that it is not identical or similar to one already used by a business dealing in the same or similar goods and services to those you will provide since this could lead to legal action against the partnership. You may wish to register your business partnership name as a trademark. Although it is not required, it will stop others trading under the same name deliberately or by accident.
What is the difference between a business partnership and other types of partnership?
In a business partnership, similar to a sole trader, each partner has unlimited liability for the debts of the business. While it is the simplest form of partnership, it is not without risk. There are two other types of partnership that may be more appropriate depending on the circumstances; limited partnership (LP) or limited liability partnership (LLP).
A limited partnership (LP) requires two or more partners to enter a partnership, but the key difference here is that the limited partners are only liable up to the amount of their investment into the partnership. However, a limited partnership must have at least one ‘general partner’ (although it can have more), and they have different responsibilities and liabilities for the partnership’s debt, that is they have unlimited liability for any debts the partnership can’t pay. To register a limited partnership, you will need to download and complete the form to apply for a registration of a limited partnership.
Limited liability partnerships (LLPs) are separate entities to that of the partners. They combine the flexible structure of a partnership with the benefits of limited liability for the partners. A limited liability partnership owns the assets of the business and is liable for its own debts. Each partner only has liability up to the amount they have contributed to the LLP. To register a limited liability partnership, you will need to download and complete the form to apply for the registration of a limited liability partnership or use a third party agent to complete the process.
In the case of both limited partnerships and limited liability partnerships, all partners must register for self-assessment with HMRC, with nominated general partners in limited partnerships also registering for business self-assessment in addition to personal self assessment with HMRC.
How much does it cost to setup a business partnership?
The cost of setting up a business partnership is relatively low. There is no fee to register a business partnership with Companies House. However, depending on the nature of business your partnership is looking to undertake, there may be some additional costs associated with setting up a partnership, such as business banking and business insurance. If you are considering setting up a limited partnership, there is a cost of £20 to register with Companies House and for a limited liability partnership, it costs £40 to register with Companies House.