Partnership structure - agreement

Partnership structure - agreement

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I'm interested in setting up a partnership of freelance translators, each working in different language combinations/specialisms. The idea is that the whole their marketing efforts will be greater than the sum of its parts (they each benefit mutually from each other's digital marketing/networking efforts but are not in competition with each other).

Is it possible to draw up an agreement whereby you only receive the income you generate, with a percentage (say 10%) going to a corporate partner who's in charge of coordinating everything?

e.g.

Freelancer A has a 20% share

Freelancer B has a 20% share

Freelancer C has a 20% share

Corporate partner Ltd has a 40% share

Freelancer A earns £1000 for a job, takes £900 and gives £100 to corporate partner Ltd

Freelancer B  earns £2000 for a job, takes £1800 and gives £200 to the corporate partner Ltd

Freelancer C  earns £500 for a job, takes £450 and gives £50 to the corporate partner Ltdc.

etc.

Is this possible?

Thanks

David

Replies (4)

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By Tim Vane
20th Jul 2015 11:58

Oh dear. Well first up, partnerships don't have shares, so you can't split profits according to shares. You can split profits any way the partners agree, the only limitation being that you cannot have one partner receive a loss where other partners receive a profit, or vice versa.

It is essential that a legally binding and water-tight partnership agreement is entered into by all partners before starting, or any future disputes can get very messy and very expensive. There are also other important questions that need to be considered at startup. Having a corporate partner also complicates the reporting requirements.

So what you need to do is appoint an accountant to walk you through the process, and speak to a lawyer about a partnership agreement. Don't move until you've done both of those things, or you'll walk yourself into a quagmire.

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Replying to Wilson Philips:
By johngroganjga
20th Jul 2015 17:22

Tax

Tim Vane wrote:

... the only limitation being that you cannot have one partner receive a loss where other partners receive a profit, or vice versa.

I think Tim forgot to include the words "for tax purposes".

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By djhoward
20th Jul 2015 13:27

Thanks Tim for your quick response,

I probably should have said "percentage ownership" rather than shares; I'm aware that partnerships don't have shares!

It's helpful to know that you can split the profits however you agree - but I'll definitely seek advice from an accountant and lawyer before I go ahead (if I go ahead).

Thanks again,

David

 

 

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By Tim Vane
21st Jul 2015 13:37

Yes indeed I did John. Thanks for clarifying.

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