Partnership is an association of persons carrying on a business as partners but does not include a company. Companies are specifically excluded from the description of partnership.
The existence of partnership is determined based on following factors:
- Joint ownership of business assets
- Joint bank accounts
- Registration of business name
- Sharing of profits/losses
- Capital investment
- Trading in joint names
- Requirements of valid partnership
Although there is no legal requirement for there to be a partnership agreement, it would be prudent for the relationship between the partners to be documents before the partnership commences. That will assist in identifying the terms under which the partners agree to carry on business and will assist in establishing the arrangement to the ATO.
A partnership may be formed as a legitimate tax planning technique. Members of family such as spouses can form a partnership, split income and therefore reduce the family’s overall tax liability. Like other business structures, partnerships need to lodge an annual tax return and each partner pays their own share of taxes.
If you would like to discuss with us more about your circumstance or register a partnership, please feel free to call us on 0452214559 and we shall assist you.