Partnership v's Sole Trader

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gilboy

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I am self-employed, registered as a sole trader with the revenue. I have 2 staff. My father is retired and helps me out from time to time with my business but does not get paid a salary.

If I was to change to a partnership(me and my father) - is there any tax benefits to this

Thanks!
 
If your father is not getting any income, then I can't see how there could be a tax advantage.

If he is getting an income, then it requires a few calculations. As an employee, you would have to pay Employers PRSI, but he would have the employee tax credit, assuming he is not using it against his PAYE income. As a partner, he would have to pay much lower PRSI, but would not have the employee tax credit.

Unless he is going to be getting substantial income, I would avoid having him as a partner. The main downside is that if the business gets into trouble, he would be liable for the entire debts of the business.

Brendan
 
gilboy said:
I am self-employed, registered as a sole trader with the revenue. I have 2 staff. My father is retired and helps me out from time to time with my business but does not get paid a salary.

If I was to change to a partnership(me and my father) - is there any tax benefits to this

Thanks!
Click to expand...
There are many legal implications re Partnership.

You need to consult a solicitor if you are serious about forming a partnership as the Partnership legislation on the statute books is completely inadequate for business today but in the absence of an express partnership between you and your dad,it will apply.

You would both be jointly and severally liable for the debts of the business for example.
 
Why not pay him as a self employed individual - you should be able to do this if he only does ad-hoc work and pay him for the work he does. Otherwise set him up as an employee and pay him through payroll.

As mentioned above - partnership may not be the way to go.

Does your father have any other income? What is his rate of tax? What is your rate of tax? You need to establish these first to see if any tax advantage in paying him at all.
 
gilboy said:
If I was to change to a partnership(me and my father) - is there any tax benefits to this
Click to expand...

Almost certainly not, unless you also made other changes in your setup (such as sharing profits with him). And you introduce new complications which you probably would not want.
 
my father is no longer working and has no other income.

If I am self employed, I have my personal tax credit of 1800 per year. Working in a partnership, would the partnership have a tax free allowance of 3600 rather than a tax free allowance of 1800 as a sole trader. Hence, less tax paid in partnership

BTW My father is 65
 
The taxation is such that the profits and gains assessable under the partnership are split in accordance with the partnership agreement between the individual partners, and they pay their relevant tax on that income/gain.

The partnership itself does not pay tax.

You should really take professional advice if you are considering a partnership.
 
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