Partnership or Limited Company

J

jimmyd

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With the company I am working with closing down a few of us want to take over the customer base.

There are 4 of us in total that form the service team and 2 of us have done up a business plan and got approval from the bank for a loan and the customers have said they will stick with us.

What would be the best way to setup this? A limited company or a partnership?

One of the lads has setup a partnership with his wife and he and his wife have signed for the loan. At the moment he intends to hire the 3 other (including myself) as employees. He has asked me to replace his wife in the partnership once the business gets going - would I then be liable for the bank loan?

If I become a partner I know I would also be liable for any debts that we create but I think we have enough sense not to create any problems -is this the only advantage of a limited company or is the tax cheaper?

Can some explain the taxation of a partnership in relation to drawings?
 
I would go with the Ltd co. Have seen the best of friends going into partnership and falling out. With a partnership whatever profits you make is what you are taxed on. Say ye have a profit of €100k ye would be both taxed on your share of this (prob 50% each). You might only take drawing each for the year of say 20k and the other 80k could be left lying in the bank but you are still taxed on the 100k.
You should set up a company and take a salary each based on the time you both put in. The company would pay paye/prsi on this and would then pay corporation tax at 12.5% on whatever profit they have left at the end of the year.
If the company is audit exempt(based on turnover,employees,net assets) accountants fees would be about the same for the year.
 
jimmyd said:
If I become a partner I know I would also be liable for any debts that we create but I think we have enough sense not to create any problems
Click to expand...

Do bear in mind that if you form a limited company, you will similarly be ultimately personally liable for all debts incurred by the company.
 
Indeed (iirc the term used in the legislation is "negligence" on the part of the directors). How this applies to any particular case would be ultimately a matter for decision by a court, normally following an application to the court by the Revenue, a bank or other creditor. Personally I believe that any small business promoter would have their work cut out in avoiding being held personally liable in such a scenario.
 
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