So looking at running a business with a mate, going to be a partnership so we need an agreement to make sure we have it all covered going forward.

Lots of websites offering one for £xx much like the old will writing stuff..anyone know of a good source of a template for free…

And whilst we are on the subject, if we operate as a partnership, and both have full time jobs as 40% tax payers, what are our tax liabilities. If we keep all the money in the company bank and do not pay ourselves are we still liable for tax?

LLP or conventional partnership? You need professional advice but I appreciate it costs.

Both of the above are tax transparent i.e. if there are any profits in the partnership you are liable for the tax.

get some advice – any reasons you’re not settign up a company, for example?

Its just a hobby business really so we just want to keep it simple, chances are we are only going to cover our costs and not make much in profit so though a company would be a bit overkill…

Any profit you make is yours so it is liable for tax whether or not you draw it from the business bank account.

If you don’t need to make money from the venture look at ways of offsetting profits against expenses – you can run a car through a partnership as a tax deductible expense so get yourself a car costing the same per month as the partnership generates in profit.

Partnership

You don’t need a formal agreement to enter into partnership (aka “partnership at will”). Agreements are useful if a complicated business or in the case of disputes.

Partnerships are easy: you and mate agree how you’ll split the income. Each of you gets your share. You’re taxed as a self employed person (i.e. normal income tax).

Easy to administer – no accounts required. Nothing has to be filed at companies house.

But, they don’t protect you if there’s a claim against you. So, if your mate causes a client loss, they can sue him, him and you or just you.

Limited liability partnerships

These are a hybrid of a company and a traditional partnership. You are not partners, but members.

More like companies – limited liability. Have to file information at companies house (including accounts, which will have to be audited if over a certain income). More administratice burden.

Still tax “transparent” – i.e. you just pay income tax (and NICs) on your share of the LLP’s income.

Company

Easily identified – name ends in “limited” or “plc”.

You want a private limited company (“limited”). This, like an LLP, has a separate legal identity. You become shareholders (if limited by shares) or members (if limited by guarantee. Profit making companies are usually limited by shares.

You hold the number of shares to give you your ownership proportion.

Company receives income and pays corporation tax on it (depending on thresholds). You receive money out of company either as salary (PAYE + employer & employee NICs) or as dividend (not PAYE, no NICs).

You also need directors (can be same as shareholders), and need to jump through various admin hoops (companies house filings, accounts, etc.).

Easy..!

buissness link, its free,

Join your local Chamber of Commerce. They’re excellent for advice on this kind of thing. In fact, they’re pretty good at advice for most things when you’re running a small business