Published on 21/09/2017 by Any Business.Com.Au

Buying into a business partnership - info you must know

A partnership is a business structure that involves a number of people who carry on a business together.

You may choose a partnership over a sole trader structure for example, if you'll be jointly running the business with another person or a number of people (up to 20).

There are two types of partnerships - general and limited. Partnerships are governed by the relevant law depending on your state or territory.

General partnership

A general partnership is one where all partners are equally responsible for the management of the business, and each has unlimited liability for the debts and obligations it may incur.

A family partnership is where two or more members are related to one another.

Limited partnership

A limited partnership is one where the liability of one or more partners for the debts and obligations of the business is limited. A limited partnership consists of one or more general partners (whose liability is unlimited) and one or more limited partners (whose liability is limited in proportion to their investment). There is no maximum number of limited partners.

An incorporated limited partnership is a special type of limited partnership, primarily used by businesses engaged in high-risk venture capital projects. You should seek expert legal advice if considering forming this type of partnership. Limited and incorporated limited partnerships must be registered with Consumer Affairs Victoria (CAV).

Joint Venture

A joint venture is two or more people or entities who join to do business together for a particular purpose, usually a single project, rather than as an ongoing business. A joint venture will often have a joint venture agreement.

Key aspects of a partnership structure

• It's relatively easy and inexpensive to set up.

• It requires a separate Tax File Number (TFN).

• If you are carrying on an enterprise, you can apply for an Australian Business Number (ABN) but this is not compulsory.

• It's not a separate entity - like a sole trader, you and your business partners are personally liable for the debts of the business.

• You have shared control and management of the business with your partners.

• The partnership doesn't pay income tax on the income earned. You and each of your partners pay tax on the share of the net partnership income you each receive.

• Requires a partnership tax return to be lodged with the Australian Taxation Office (ATO) each year.

• Each partner is responsible for their own superannuation arrangements - you are not an employee of the partnership.

You must be registered for GST if the annual income turnover is $75,000 or more.

AnyBusiness.com.au

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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