Build a Partnership Business Type

This is a similar identity to that of a sole trader but there are two people instead of one. The advantages are much the same as being a sole trader, however when it comes to making decisions you will obviously need to reach agreement with your partner.

Having a formal partnership agreement

Partnerships work well when things are going well but if things go wrong you will need something to fall back on. For example:

• one partner wants to sell the business and recoup their investment;
• one partner no longer wishes to work in the partnership but doesn’t want to sell the business;
• additional cash is needed to expand the business but only one partner is able to the raise the cash.

With a partnership there are lots of `what if s to consider. Even if your partner is your husband, wife, relative or best friend you should have a formal partnership agreement drawn up by a solicitor. Remember also that over time your partner’s personal circumstances may change. You might start off as two carefree friends with lots of time to devote to your business and everything go well. Then either you or your partner marries, has children, and is no longer able to devote the same amount of time that they previously did to your business.

What happens when you one of you works fewer hours than the other and still wants the same return?

Or your partner’s wife decides that she too would like to be a part of the business? Or your partner gets divorced and their husband decides that they are entitled to a share of the business because they have been married to one of the partners?

Lots of questions need to be answered before entering a partnership, which is why you will need to have a deed of partnership drawn up.

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