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February 2, 2021 at 12:07 am #1000557Edel116Member
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I am looking for advice on a business structure. My husband works for himself in Excavation. We have been approached to go into partnership, this company has multiple different businesses. My Husband will be doing all the work the partner will put 50% into the company for the cost of new equipment and he has the contacts to get more business. My husband is thinking he takes a wage from the business then pay all outstanding bills and split the profit .My question is how does taxes ect work out. We have more expenses that we can write off on taxes for the company ect home office and the Fuel ect . Any advice would be great I don’t want to go into meeting blind regarding the percentage of taking home.February 2, 2021 at 1:34 am #1224772Rowan@quaoticParticipant
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My advice is – go to your accountant and ask your questions there. Also make sure you have a good contract, including exit clause and pass it by a solicitor. Going into a partnership can be fraught with problems if you don’t do it right.
Your questions can be complicated territory so both parties need to be on the same page with everything.February 2, 2021 at 3:48 am #1224773Paul – FS ConciergeModerator
- Total posts: 3,119
Hi and welcome to Flying Solo.
It is always nice to have options, particularly those that decrease risk or increase income but there are downsides as well.
Edited to delete “advice” in favour of James Millar’s advice below.
It can get complicated quickly and seeing an Accountant is the best course of advice I can offer.
PaulFebruary 5, 2021 at 3:51 am #1224774JamesMillarParticipant
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I think you need to see an accountant. Partners in a partnership cannot employ themselves and take salary and wages. It comes back to the fact that an individual cannot enter a contract with themselves as the same party (both the employer and employee)
You can learn more in TR 2005/7
The courts have characterised agreements under which a ‘partnership salary’ is to be drawn by a partner from partnership funds as not creating a contract of employment or contract for the services of the partner, but rather as an agreement to vary the sharing of partnership profits between the partners (for example Ellis v. Joseph Ellis & Co.  1 KB 324, MacKinlay (Inspector of Taxes) v. Arthur Young McClelland Moores & Co.  2 AC 239 (MacKinlay)). An agreement to pay a ‘partnership salary’ to a partner for his work as a partner is an internal agreement as to how the partnership’s funds will be applied as between the partners, and is enforceable on the taking of partnership accounts. A ‘partnership salary’ is a distribution of partnership funds to the partner, and does not have the character of an expense of the partnership (MacKinlay).
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