Business Sturcture - Partnetrship

Choosing a business structure when starting up a business is an important element of the setup phase.

Business structure is important as it can impact on taxation, liability of owners, succession, ownership issues and disposal of your business.

A partnership business structure is a little more complex than sole proprietorship. With this structure, two or more people start a business and can legally share profits, risks and losses in accordance with the terms and conditions of a partnership agreement or, where no formal partnership agreements applies, in accordance with the common law terms and conditions of partnership.

The main features of a partnership include:
  • a Partnership is an association of people who carry on business in common
  • it is not a separate legal entity
  • all partners are collectively liable for all business debts
  • because it is not a separate legal entity, there can be no transfer of ownership between partners or to non partners
  • any change of ownership requires dissolution of the partnership
  • profits and or losses are distributed to partners in accordance with terms and conditions of partnership agreement
  • Capital Gains Tax concessions can apply
  • each partner can participate in management
The ATO's Personal Services Income (PSI) regulations can impact on labour only type business operations. Advice should be obtained from a registered tax agent or practicing accountant.

For a FREE fact sheet ==> Partnership Explained

For a summary of the four types of business structures ==> Business Structures Explained

Copyright 2014. My Tax Zone.