Business Structure — Partnership

A partnership at common law is not a separate legal entity. Two or more people, or entities, can enter into an agreement either verbally or under contract to enter into a business and share in the risks and profits. Partners are jointly and severely liable for debts and litigations of the partnership.

Establishment

• A partnership agreement should be in place
• May require a company to act as agent
• Use of any business name should be registered
• May require registration for TFN, ABN, GST and/or PAYG

Advantages 

• Relatively inexpensive to establish
• Ability for income splitting between partners
• Partners may obtain 50% CGT discount
• Small business CGT concessions easily obtained
• Partnership losses distributed to partners to be offset against other income
• Individual partners’ benefits not subject to FBT
• Any entity can be a partner

Disadvantages

• The partners are jointly and severely liable
• Distributions from partnership must be in proportion to ownership
• Changes in partners will have CGT consequences
• Partners cannot be employed by the partnership for salary packaging purposes
• Income cannot be accumulated in the partnership

To learn about the other business structures available in Australia click the links below.