- All business profits are taxed at the income tax rate of up to 40% - and you need to prepare annual tax returns
- You are personally liable for any losses/debts that the business incurs
- If you are a 'one man or woman band', a lot of responsibility can be on your shoulders which can sometimes be overwhelming.
A Partnership is a formal arrangement where at least two parties have entered a legal agreement to run a business together and share the profits. There are different types of partnerships structures but the most common types are
1. General Partnerships and
2. Limited Partnerships.
1. General Partnerships
This is where two or more parties agree to share both liability and profits for a business with a legally binding contract for the partnership business
Advantages of A General Partnership
2. Limited Partnership
A Limited Partnership is similar to a General Partnership in a lot of respects but the key difference is that the Limited Partner only shares some of the Liability based on the amount they have invested in the business.
A Limited Partner can sometimes be called a "Silent Partner". While they have invested in the business, they usually do not provide any support or influence in running the business.
A Limited Company is a separate legal entity to its owners and this is the main difference in business structure from a Sole Trader or Partnership.
All assets and liabilities are owned by the company itself so the personal assets of Company Directors are safe and not at risk in the event that there is a claim against the company or it cannot pay its debts.
Limited Companies can avail of a much lower corporation tax rate of 12.5% on business profits. This is a significant difference in tax rates compared to Sole Traders and Partnerships.
- It may take longer to set up a company and can be more expensive than a Sole Trader
- More corporate filings and deadlines
- Large penalties and fines for non-compliance
There are a number of different types of companies, to see the different types and the differences between them you can CLICK HERE
Help is Available If You Need it