Partner.

[breffni]

I've been working with a friend doing some jobs together for the last year or so. We both subby for other people but have been getting alot of jobs together. We want to formalise the partnership but i'm unsure how to do it. We would like to open a bank account together so any jobs we get the money goes straight in to it. Would we be best opening a business account? Any advice welcome. Thank's

[htb]

No need for a business account, the banks don't like it but not much they can do, if they get shirty move to another bank. We have been doing our partnership for the last 10 yrs and not had to open a business account yet or move banks, just don't tell them its a business .

[flatyre]

ant account will do as long as both signatories are required for large withdrawals!

[Inoff the Red]

Sorry if I am a bit late responding here but there are a number of issues you need to consider when establishing a partnership. It is not clear whether you intend to carry on doing your own jobs as  subbies and use the partnership for joint efforts, but either way the partnership is a separate legal entity and you will need to advise HMRC that you have started a partnership and give details of the partners involved. HMRC will issue the partnership with its own unique tax reference number and you will need to submit a separate partnership tax return.

The partnership tax return basically records the revenues and costs of the partnership and has a page for each partner showing their profit share. This info needs to go on the individual tax return of each partner.

 

As for bank accounts, I would strongly recommend opening a separate partnership bank account and using it solely for partnership business transactions. The partners can agree on how to profits are to be divided and drawn from the business bank account. This makes the preparation of accounts simple, it also means that if (when) you get a visit from HMRC they are not presented with a set of bank statements which include dozens of personal expenses.

 

I would also suggest having a formal partnership agreement setting out how decisions are to be made, how profits are to be shared etc.

 

 

 

 

 

[Ty Korrigan]

Hello,

 Before taking on a business partner, seek the advice of a business lawyer.

It is important to outline individual responsibilites within your structure and to get on paper a divorce strategy.

Plan for the worst, it will pay dividends in the long run.

Be aware that over 80% of partnerships fail with a few years and the fall out can be damaging financially and emotionally which is why a pre-nupt with exit strategy drawn up by a lawyer is imperitive.

A 50/50 partnership may seem an egalitarian way to go but history has shown that to be the most unstable and volatile relationship.

Retaining majority shares 80/20 is a better way to retain control of your business whilst providing some ownership to a potential partner.

Think about this. In a 50/50 you will need the approval of your business partner for any decision , in the event of a disagreament, if you over ride his wishes you may enter into a tit for tat situation and your relationship stands to rapidly decay.

All administration should be kept in a neutral zone, not anothers house in an office between bathroom and bedroom.

Use of materials, business assets for private use, being seen to be working on the side, not working enough, not pulling your weight, all potential issues.

Business partnership? never a 50/50 and never without a pre-nupt agreement.

 Regards

   Ty

 

 

 

 

 

 

[Ty Korrigan]

To add, a sure way to ruin a good friendship is to become partners.

Ty

[Rough Hewn]

Keep it separate.
Stay mates.
Partnerships I've had ended badly.
Never again.
Working with mates regularly yes.
[emoji106]

[AHPP]

If you were near me, I’d encourage you to go for it so I could buy your equipment when you fall out in 18 months. Since you’re not, don’t do it!

[Mick Dempsey]

Partnerships in the tree game often end badly from what I can see for two reasons (apart from the obvious ones of people not getting on or one not pulling their weight)

 

1. It’s not that complex so you’ve little need of two people to deal with everyday stuff compared to building/construction where the skill set need to be higher.

 

2. There’s not enough money in it for two people to get a big bite at the pie.

 

Having a wife/girlfriend who can help with the phone, accounts etc and is really in your corner is a winning combination.

 

There are always exceptions of course.

Edited November 14, 2017 by Mick Dempsey

[Inoff the Red]

3 hours ago, Mick Dempsey said:

 

2. There’s not enough money in it for two people to get a big bite at the pie.

 

 

 

Well that depends on your business model and the relative strengths/weakneses of a business partner..

As a sole trader there is a limit on your earning capacity because there are only 24 hours in a day and there is a limit to the amount of work you can do. Adding a partner increases your production capacity but increases the number of mouths to feed so on its own it doesn't take you further forward financially.

You can employ subbies but if they are used to support you in your  production role you have increased your profit by the difference between the cost of employing the subbie and the additional income you get from the job by using him but there is still a fundamental capacity constraint. 

The next step up in the business model requires a fundamental change in the method of operation but it also introduces a whole new level of risks. To move beyond the capacity constraints of a sole trader/partner with or without subcontractors the business owner/partners need to change from being do-ers to managers. In this phase the business owner(s) control the sourcing of work, developing business contacts to ensure that the work flow is sustainable and supervise others who actually do the work. The keys to success are combining technical excellence to get the jobs done right and the management skills needed to develop and control a business and manage a workforce. 

If the reason for forming a partnership is to harness the differing skills of the partners and build a business by employing labour/subcontractors to expand capacity then it could increase the earnings of the partners beyond the level they could earn as sole traders but it takes time and it does introduce a level of risk.