What is a partnership?
In the business context, a partnership is an association of 2 or more people running a business where the control, as well as the benefits and risks of the business, are shared between the partners. Each individual partner is responsible for the debts of the partnership, even if that individual did not incur the debt. A partnership is not a separate legal entity, but is rather a relationship between the individual partners.
How many partners can we have?
There must be at least 2 partners, but you can have as many as you like.
Can a partnership have employees?
Yes, the partnership can employ people to work in the business. If you have employees, you will need to, among other things, register for PAYG withholding, pay super on their behalf and take out a workers compensation policy covering them.
Does workers' compensation cover us as partners?
No. You can’t take out a workers' compensation insurance policy for yourselves as partners in a business. If you want to insure yourselves for work injuries, you should consider other types of insurance like personal accident or income protection insurance.
Does the partnership need a separate TFN (Tax File Number)?
Yes. A partnership doesn’t pay income tax, rather each of the partners pays income tax on their share of partnership income. However, the tax office still requires the partnership to lodge an annual tax return with its own TFN.
What do we call our partnership?
Usually the name of the partnership is simply the last names of all of the partners, eg GJ and HA Smith, or Hunt, Panos & Wong.
What if a partner dies?
That partner’s share of the business goes to their estate. This can cause issues if the deceased partner’s family is not willing to continue to run the business and wants out. The remaining partner or partners then have to be in a position to buy out the deceased partner’s share. The partnership agreement should set out exactly what is to happen in this situation (Startup World’s one does). Partnership insurance can also be very useful as it ensures the remaining partner or partners are financially able to buy out the deceased partner’s share of the business.