Sole Trader or Limited Company?: Partnerships
Full Partnership
Where two, or more, people start a business where neither are considered as employees (i.e. both are owners) the legal entity of Partnership is assumed.
Being, both partners are ‘jointly and severally liable’ for all debts and actions of the business (i.e. what one partner signs for in the name of the partnership, the other(s) shall be equally liable for in law: it is therefore crucial that ALL decisions/voting are equal irrespective of the ratio of capital invested.
A Partnership Agreement is a requirement of such a trading entity for such things as the ratio of profit for each partner – which can be dependent on start up capital invested – and what will happen to the other partners share in the event of one partners death – say, the surviving partner has to get the business valued and buy out that half of the business from the family of the deceased, or the deceased family will continue with the running of the business.
Limited Partnership
This type of partnership is fairly new and is based on the above -’Partnerships’ – but with the opportunity to have partners (Limited Partners) who make a capital investment but do not run the business in any way: a Limited P artner only has a liability up to the capital they invested. The working partners (General Partners) are ‘jointly and severally liable’ for all debts and actions for the rest of the business. Visit Limited Partnerships for more in formation.
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