Are you an entrepreneur or a business-minded person in Australia? Are you seeking ways on how to set up a partnership business? Firstly, a business partnership is an entity that consists of two or more entrepreneurs working together towards a common business objective. Usually, all partners in this business structure are equally responsible for all liabilities including debts and any other obligations.
Setting up as a partnership can be cumbersome, especially if you do not know the requirements of such a business structure. However, with proper guidance and after gathering vital information, setting up a business partnership can be easy and relatively affordable.
Requirements for Setting up a Business Partnership
According to the Australian Business Partnership Act 1958, a partnership must not consist of more than 20 partners. After determining the number of partners that you need for your business, you should register your business name and obtain an Australian Business Number (ABN). Your business name must not infringe on already existing trademarks. You must also apply for a Tax File Number (TFN), for easy filing of tax returns with the Australian Taxation Office (ATO). If you are running an enterprise and you envisage that your business will be making a turnover of more than $75,000, then you should register for Goods and Services Tax (GST).
In business partnerships, partners share control and management of the business entity. With this in mind, it is important that when setting up the business, you should have a formal written agreement that highlights the role of each partner. The agreement should also include other key aspects such as sharing of profits and distribution of assets. A solicitor or a business lawyer will help you draw out a good agreement that covers all areas of interest.
Setting up a business partnership culminates with acquiring local authority licenses and obtaining relevant permits. Depending on your type of business, it is important that you take up an insurance policy, to protect your business from any potential risks.
What are the benefits of Business Partnerships?
1. Easy to Set Up: The steps on how to set up a partnership business are easy and require less paperwork in comparison to companies and trusts. Moreover, it is relatively easy to change structures from a partnership to a company rather than registering a company from scratch.
2. Shared Liability: In business partnerships, all partners are responsible for all liabilities including debts and any other obligations. This reduces the burden that would have been on an individual, like it is the case with sole proprietorships.
3. Wider Pool of Expertise and Capital: In a partnership structure, every member is an expert in a certain area thus giving the business a wider pool of expertise. Additionally, members contribute to the business capital, giving the business a substantial capital base
Disadvantages of business partnerships
The advantages that come with business partnerships simply outweigh the disadvantages. However, the fact that all partners have equal liability can be a disadvantage to some extent. A partner cannot transact with a third party without the approval of other partners. This may lead to a business making losses in case other partners object a particular partner from engaging in a potentially lucrative contract.
In case you are seeking ways on how to set up a partnership business in Australia, consider enlisting the services of a reliable business accountant such as Femia Accountants. From registration, tax compliance to business evaluation, we will assist you to make all the right business decisions.
Contact our office today on 9316 4500 or book a time to meet with us.