When you’re looking to start up in business it’s advisable to know the definition of different models – so you know the path you’ve chosen is right for you. A general partnership, for example, comprises of two or more people sharing business decisions, and in any net profits.
A private limited company is a legal body, run by directors and owned by shareholders. See the advantages and disadvantages of partnership and private limited company here…
- As a partnership the business is exempt from paying income tax – each partner files the profits or losses of the business on a personal income tax return
- The partnership is simple to set up – you need to choose an available name, create an agreement with the help of an attorney, register with HMRC for self-assessment tax, and open a business bank account
- Due to having more than one owner there’s an increased range of knowledge, skills, and contacts – and a greater ability to raise funds
- The affairs of a partnership can be kept confidential – documents are not required to be available for public inspection
- Partnerships can be potentially unstable as partners may want to withdraw from the business – and cannot transfer interest in the business without the consent of everyone else
- Each partner is liable for any business debt – meaning creditors can take personal assets of the partners if the business lacks the assets
- Partners are jointly and severally liable for the actions of partnership obligations – including contracts, and breaches of trust. Suing by a third party may result in remaining partners settling any debt
- There may be limited access to capital – as a partnership is seen as a higher risk, banks may be unwilling to lend, or will do so with less favourable terms
Private Limited Company Advantages…
- A private limited company has the benefit of financial liability being limited to shares of the shareholders – if the company was in financial trouble the shareholder wouldn’t lose personal assets
- A private limited company is incorporated – if the owner leaves the business or dies the company will continue to exist
- Additional capital can easily be raised – by simply selling shares
- Tax reliefs can be enjoyed – corporation tax may be lower than other types of businesses and offers greater flexibility for tax study and planning
- Audited annual returns and accounts have to be made by law to the Registrar of Companies – and all documents are available to the public
- More expensive and time-consuming to set up – and professional help will be needed to do so
- Ownership and control are separate – owners don’t make all of the decisions
Get Help from the Professionals
Looking for an accountant in London? Contact a trusted company who provide proficient outsourced accounting services to help you with tax planning – and give you expert accountancy advice.
Specialising in partnerships and small businesses you’ll get bespoke assistance with tax compliance, payroll, and bookkeeping needs. And VAT return services are provided to ensure your year-end accounting obligations are perfectly fulfilled.
Whether you choose a business partnership or to be part of a private limited company your taxation and accounting will all be taken care of – and you can simply focus on your business growth.