What is a Partnership?
A Partnership is a business where two or more people (partners) engage in a business together. The partners should share the risks and responsibilities involved in running the Partnership- You will usually need a separate business name so that people know what you do
- The business name needs to be registered with ASIC
Benefits of a Partnership
- Easy to set up and low start-up costs
- Reduced regulations
- Profits can be split between partners
- Partners are not considered employees – so superannuation is not payable on profits distributed to partners
Disadvantages of being a Partnership
- Should have a partnership agreement – setting out the rights of each partner
- This is a legally binding document – helps to avoid and disputes over profit sharing
- If there is no partnership agreement in place, it is assumed everything is split equally
- Profits are taxed at the individuals marginal tax rates
- Partnership tax return is required to be lodged
- Personal liability is unlimited for each partner in the business
- Changes of ownership can be difficult
Does a Partnership need to register for GST?
- If the business registers a turnover of more than $75,000 it is compulsory to register for GST
- You can voluntarily elect to register if your turnover is below this threshold
- If you do register, you must comply with your Business Activity Statement obligations
How do I account for my Partnership business ?
- You need to keep track of all business income and business expenses (including assets).
- You need to keep copies of all receipts and invoices (currently for at least 5 years).
- There is a section in your personal income tax return to declare a distribution from a partnership.
- This is then added to any other income earned from other sources and taxed at individual tax rates.
- We always advise speaking with a qualified accountant to ensure you are correctly claiming your partnership income.
This is a general guide only. Please speak with Healthy Business Finances today to discuss any questions you have in relation to your specific business needs.
(Please note that all information is correct at time of printing)