While being relatively easy and inexpensive to create, a partnership business structure can require some skilful management when it comes to taxation and accounting.
With each partner paying tax on the share of the net partnership income received, and with tax being charged at the personal tax rate (which goes up as earnings increase), it can be tricky to correctly respond to your obligations.
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In Australia, a partnership business structure is when two or more people act as co-owners in a business and share income with each other. For a partnership business, advantages include that they are cheaper to set up than a company, and profits do not have to be disclosed publicly.
A written agreement brings a partnership into being. Once done, you will then need to:
If your partnership has revenue in excess of $75,000 per year, it may also be necessary to register for GST.
A partnership ceases to exist every time there is a change in membership. If you wish to add or remove individuals from the partnership, you must dissolve the present partnership and create a new one. This is done by executing a new partnership agreement.
Generally no. A partnership is not an effective vehicle for holding or amassing appreciating assets. This is because a change in the Partnership has certain capital gains tax implications.
Partnerships can be a good tax structure to minimise tax, because a partner can use any losses to offset income earned from other sources.