Two or more people can register the formation of a business partnership with HMRC. Responsibilities of setting up a business partnership also include naming the company and filing tax returns.
Forming a partnership in business has many similarities with the process of becoming a sole trader.
The main difference being that it links several partners into the simplified business structure.
But, unlike a limited company, the partners who run a business partnership 'personally' share certain responsibilities, such as:
As a rule, the partners would share out any of the business profits between themselves. That means each partner has the responsibility of paying taxes on their own particular share.
There is no separate legal status for setting up a business partnership. You would need to set up a private limited company for the business to be a distinct legal entity.
Note: There is no rule saying your partner must be an actual person. In fact, a limited company can be a partner because it can count as a 'legal person'.
One of the individuals must be the 'nominated partner'. This person has several important responsibilities. They would manage the partnership's tax returns and keep business records. To complete the process of setting up a business partnership, you must:
Note: A different set of rules and regulations exist for limited partnerships and for limited liability partnerships (LLP).
You may be wondering whether a business partnership can have a business name. In fact, you can choose to trade under your own name or under another chosen name for the business. There is no need to register your name (e.g. at Companies House).
But, you must include the names of all partners, and the business name if you have one (the trading name) on official company paperwork (e.g. invoices and letters).
Note: What you choose to name the business could be a crucial part of setting up as a sole trader. It is wise to do some research on website design and search engine optimisation if you are including them in your advertising and marketing campaigns.
You can stop other people trading under your business name if it is important to your situation. In this case, you would need to apply to register a trade mark to stop it happening.
Note: The business trading name must not contain a 'sensitive' word or expression. Likewise, it must not suggest a connection with any government or local authorities (unless you have permission to do so). Further guidance is available about incorporation and names for companies in the United Kingdom.
The 'nominated partner' would need to register for and file your Self Assessment tax return as part of setting up a business partnership. This is the person responsible for sending in the partnership tax return. The other partners would to make a separate registration.
Each of the partners would need to send in their own Self Assessment tax returns as individuals. But, HMRC can charge you a penalty if you fail to register by the 5th of October in the second tax year of the business.
Note: You can use your Government Gateway account (or create one) to register a partner or partnership.
You can choose to make a voluntary registration. It may suit your trading circumstances if you sell to other VAT-registered businesses. It means you would be able to reclaim the VAT.
How to Register a Business Partnership in the United Kingdom