The Pitfalls of Setting Up a Partnership in a Family Business #AskAMS

Should we set up our family business as a Partnership?

There are many reasons for not choosing a Partnership in your position, for instance:

• They are less tax efficient than Limited Companies
• Partners must pay Class 4 National Insurance
• All Partners are responsible for all debts
• Partnerships can result in disagreements if there is no legal agreement. (A Limited Liability Partnership could be better).

Here are some advantages to a Partnership over a Limited Company structure:

• Income can be apportioned more flexibly between Partners (but please get a legal agreement)
• The rules are less rigid than for Company dividends.
• Partners’ cars can be more easily used to save tax