Maximizing Profits and Efficiency: Accounting Services Tailored for Partnerships
Accounting services tailored specifically for partnerships – a game-changer for maximizing profits and efficiency. In the fast-paced business world, partnerships require a unique set of accounting practices to ensure smooth operations and financial success.
Deciding on a structure is a crucial step when starting a business and is influenced by three primary factors: liability, taxation and record-keeping. The type of business entity you choose will be affected by your personal circumstances and business goals. Choosing to establish a partnership is a quick and relatively simple process and offers a number of benefits in comparison to establishing a Limited Company or choosing to be a sole trader.
What is a Partnership?
A partnership is a legal agreement to manage and operate a business between two or more people. You will share the responsibility of the business with your partner(s) including any profits, losses or expenses. A ‘partner’ doesn’t have to be a person –a limited company can also be a ‘partner’. There are different types of business partnership arrangements to suit different criteria.
Types Of Business Partnership
‘Ordinary’ partnership – a simple and flexible structure for a business to be owned by two or more individuals who agree to run the business as partners. The partnership must be dissolved if a partner dies, resigns or goes bankrupt. A nominated partner will register the business with HMRC for Self Assessment tax purposes.
Limited partnership (LP) - more structured than ‘ordinary’ partnerships and have both ordinary and limited partners. Limited partnerships need to register with Companies House – but are not required to file year end accounts.
Limited liability partnership (LLPs) – LLPs enjoy the benefit of being a corporate entity with limited liability but are taxed as partnerships. As corporate entities, LLPs must have at least 2 designated members, register with Companies House and file statutory accounts.
Unlike sole traders, partnerships are legally separate entities from the individuals. However each partner still has the responsibility to manage and run the business day to day, and all partners share liabilities and profits equally (in some set ups partners may have limited liability).
Benefits Of Establishing A Partnership
Easy to establish
Broader range of expertise, skills, knowledge
Increased contact base compared to sole trader
Increased investment compared to sole trader
Less legal obligations and financial reporting than Limited Company
Spread the financial risk
Share of day to day tasks
Better support than sole trader
More privacy than Limited Company
Potential Tax Benefits
Potential increased borrowing capacity
Whilst there are a number of benefits from working with a partner, there are a few things to consider when preparing a partnership agreement. Do you work well with other people, are you happy to share decision making? If one partner invested more capital than another, will this be reflected in profit distribution? Expectations and people’s personal circumstances can change over time, so it is important that a partnership agreement sets out clearly the roles, responsibilities and profit distribution in a written format prior to trading to avoid later conflict:
Work distribution – who will be responsible for what within the business?
Finance – how much will each partner invest?
Ending the partnership – if a partner dies, divorces, retires or wants to dissolve the partnership how what will happen with the business?
Setting Up A Partnership
Partnerships in the UK are governed by s45 of the 1890 Partnership Act. When you set up a partnership, you must choose a nominated partner who will register with HMRC. They will be responsible for keeping the business records and ensuring tax returns are filed accurately and on time.
You can register your partnership directly with HMRC or appoint your accountant to register on your behalf. At Styles & Associates Accountancy we would be happy to discuss with you the best partnership structure for your business and register with HMRC as your agent. Call us on 01420 541 554 to discuss your options.
Partnership Tax Return
HMRC require partnerships to complete an annual Partnership Tax Return using form SA800. The partnership itself is not liable to tax – it is the partners who are individually liable to pay tax on the partnership profit. The SA800 form will indicate how profits are split and define how each partner should be taxed.
Partners must declare their individual profits from the partnership on the partnership pages of an SA104 form. Some partnerships may be also liable for VAT if their turnover exceeds £85,000 and for capital gains tax on the disposal of business assets.
If you fail to file the Partnership Tax Return by the appropriate deadline, each partner who was a member of the partnership during the return period can be charged a £100 penalty. Using a reliable accountant to manage your tax will ensure that your returns are filed accurately and on time every time. At Styles & Associates Accountancy we can calculate any income tax owed or rebate payable and submit the tax return to HMRC on your behalf. Call 01420 541 554 to discuss how we can help you.
Partnership Marriage Allowance
As a partnership you may be able to benefit from Marriage Allowance – this allows you to transfer £1,250 of your Personal Allowance to your legal partner which can reduce your tax bill by up to £250. Marriage Allowance is applicable if you or your partner earns below the Personal Allowance (£12,500 as at 2021), and the higher earning partner earns between £12,501 and £50,000, before they receive Marriage Allowance.
If you would like to find out if you are eligible to benefit from Marriage Allowance call Styles & Associates Accountancy on 01420 541 554.
Partnership Accounting Software.
When you are running a business, time is valuable - by using an accounting software package you can reduce the time it takes to produce essential invoices, track revenue and provide reports, allowing you to focus on what you do best – running your business.
Take a look at some of the accounting software solutions available to UK partnerships.
Partnership Accountant In Hampshire.
At Styles & Associates we pride ourselves on our outstanding service - whether you are a global brand, sole trader or partnership, our accountants will ensure we get to know you & your goals and use our passion and knowledge to make them a reality. We offer a wide range of services for partnerships including bookkeeping & payroll, statutory accounts, management accounts, self assessment, VAT returns and tax planning. With a focus on increasing profitability, our accounting services provide comprehensive solutions that streamline financial processes, reduce errors, and identify cost-saving opportunities. By implementing strategic financial planning, accurate reporting, and tax optimization strategies, partnership businesses can unlock their full potential and achieve long-term growth. Efficiency is key in today's competitive landscape, and these tailored accounting services offer cutting-edge technologies and software to automate mundane tasks, allowing partners to allocate more time and resources to core business operations. By leveraging the expertise of professionals who understand the unique challenges faced by partnerships, businesses can navigate complex accounting regulations with ease, minimize risks, and ultimately, thrive in a collaborative environment. Maximize your partnership's success today by harnessing the power of accounting services customized to meet your specific needs.
To arrange your free consultation, please call us on: 01420 541 554
Moving our business to Styles & Associates made savings for us on our accounting fees, corporation tax, and personal tax.