Partnerships from a tax point of view are treated similarly to sole traders. Each partner in a business needs to submit their own tax return, showing their share of the partnership profits.
This means that a partnership set of accounts needs to be prepared and provided to all partners so that they can submit them if necessary with their tax returns.
Do not under any circumstances if you are in a partnership accept ” Don’t worry I’ve done the accounts and sent them off. ” That may only be part of the story you still have to do your own tax return and may need to send a set of accounts separately.
What constitutes a partnership is governed by The Partnership Act 1890 and if there is no agreement in place then the rules as in this act are applied. This can mean that even if one person does little work they could be entitled to an equal share. The advice here is get some help and have a partnership agreement drawn up.
It is really important, do this before you get too far down the road.
This helps with things like what happens when a partner wishes to leave/join, distribution of profits and so forth. You can even allocate salaries, account for things such as if the partnership needs funding who will put it in and what proportions, whether the partners will receive interest on their capital. It can also deal with difficult issues such as the passing of one of the partners and what happens to their share.
There is plenty of good advice from trade organisations such as FSB, WKCCI or a reputable firm of solicitors such as Buss Merton, Warners or another reliable local firm that you know. A good firm will be able to tie this in to wills if necessary and how a partnership might be valued for estate purposes if necessary.
This was not meant to be a morbid piece of work, the best thing to do if considering a partnership is seek advice!!!!