Obligations to register a partnership

Obligations to register a partnership

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Hi and thank you in advance,

I have a sole trader client whose brother is in the same trade.  They share a website for generating work but the work is billed from them as individuals.  They do not share premises or bank account or any other resources I can think of.  It is only shared marketing.

Are there rules for when two sole traders are required to form a partnership?  Are there risks to not doing so in this case?  

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By johngroganjga
26th Sep 2013 10:31

In your heading you ask about obligations to register a partnership and in your last paragraph you ask about requirements to form a partnership.

Regarding registration, a partnership is required to register with HMRC so that HMRC know to issue it with partnership returns.  Clearly that cannot happen until after the partnership is formed.  There is probably a rule somewhere that says that you must do it within x days of forming a partnership but I cannot be bothered to look it up, and in practice, provided it is done reasonably promptly and well before the first partnership tax return is due there will be no problems.

Your second question I think is the wrong way round.  Perhaps what you really mean is "when is a partnership deemed to have been formed".  The answer is that a partnership exists as soon as two or more persons carry on business in common.  "In common" certainly means sharing profits.  As your client and his brother are clearly nowhere near doing that they are not even at first base - so you have no partnership and nothing to register. 

 

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By KH
26th Sep 2013 13:04

use joint venture if appropriate

If the two sole traders have the same business, and the same letterhead, and to their clients and prospective clients it is obviously two people trading as just one business, then you have a partnership, and you should register it. [Whereas if two sole traders just do the odd job together, then just do joint ventures, i.e. just putting in the individual trader's accounts their share of expenditure and income from any shared job].

With a shared website, my own view on this is that the two people are putting themselves out as a single business, and therefore that would make them a partnership. This would only change if the website clearly stated that it is a website shared by two distinct businesses, one of which would do the work for clients, rather than both being responsible for the work.

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