*** Joint venture / partnership which one is better

I am looking at working with 3 guys - we will be selling online and splitting the profits based on percentage, i would rather just register self employed and not register a company but im not sure if thats aloud, as i guess the money has to be going to some company first before its distributed and i get my share, so i also guess it would be subject to two lots of tax , i was wondering what would be best a joint venture or a partnership, one of the people would be investing £5000

 

or perhaps there is an agreement that entitles them to a percentage of the website income not a company income - then i can register self employed :-/ so confuddling

 

I would suggest booking an appointment with a HMRC advisor - they will be more than happy to help you make the right choice.. As long as they get their tax they're happy, so they should guide you in the right direction into setting up a legit company or partnership.

Alternatively, there is loads of information on the HMRC website, and some on the Direct.gov website too, regarding the best choice to make with regards to setting up a business. It explains the limitations and advantages / disadvantages of each method of partnerships, self employment, and registering a company. There's also info on what is and isn't necessary, in terms of having to register as a business or not.

Best of luck to you!
Chuckun

 

There are a lot of different laws that relate to specific types of companies that you can set up, certain types can be quite complicated to set up but will protect you slightly more should the company run into financial difficulties.
You need to think how you are allocating the profits, will it make more sense for you to have a share type agreement or an equal partnership. Definitely read the links on the direct.gov website but it would be worth you also reading the information on businesslink.gov.uk, you will find info on all company types here.

I would certainly recommend you seek professional advice, I don't know how well you know the other two people but if this is a business you are going to rely on for your income you should be as protected properly, make sure that you know your rights and also your responsibilities. The type of company you set up will affect how you have to pay tax as well so make sure you know exactly what you will have to file and declare etc.

You can probably speak to someone for free about it rather than having to pay someone, there are a lot of UK agencies that offer free support and legal advice, the UKTI is coming to my mind but I am not certain if that is the right one!

Good luck, hope I helped a bit!

 

My knowledge on the matter is from the US but I think it should apply to you. A partnership is a single company. If there are 2 partners, they share the risk and reward. You could have a partnership agreement that outlines everything, but in the absense of an agreement, you would both own the domain name, the website, and be jointly responsible for the bills and possibly the liability of what the other partner did that might get you in trouble.

A joint venture would be more like 2 guys getting together for a common good, but each is their own entity or company. You are responsible for yourself. Some of the sticky issues is who owns the domain and website? Who's bank account will receive the money? Things like that.

I would avoid partnerships if possible. Is it possible to just own everything yourself and simply pay the other person as a consultant for his services?

 

Tom11011 gives some good advice, I think from reading the UK sites you will come to the conclusion that a partnership is best avoided unless you really trust the other people involved. Generally liability in partnerships extends to personal liability, so if your partner robbed the company your personal assets would be liable to pay back the debts.

Definitely think about who owns the domain and site etc, it is possible in the UK to register a company then apply for a non-trading form which allows you time to do things like buy the website in company name, set up a company bank account etc, while not specifically trading.

 

Also, another thing to consider, a partnership is a great way to destroy a friendship when 2 people can't agree on how things should be run. Further, you may have a partner who decides he is going to contribute nothing, but still be entitled to have half the income and ownership. Then, if there is no agreement, nothing will ever get done if one partner wants to invest the money in the company but the other wants to cash it out. You'll be stuck in a situation where nothing can get done and the business suffers, kind of like our congress here in the US. One of you will have to save up every last dime and buy the other out to get rid of him.

The advantage of a partnership is usually only right at the beginning when everyone gets to pool their money and get things done, it's great because you suddenly have a lot of money to work with, but after that, I just can't see the benefit, probably all downhill from there.

Maybe what you need is an investor.

 

Since your main concern is the tax thing, I would suggest you register as self-employed and talk with your partners about it. You should consider the following as well:

1. Whether or not your partner/s would want things to legit.
2. If in case you decide to separate ways, or one of your partners do, how would you deal with this in a legal way.
3. Whether or not your partners would want to be recognized as owners. This will play a role when it comes to branding your business.

On the safe side and for everyone’s benefit you should register as a company with JV’s.

 

thanks for all the advice guys, ive emailed a accountant about the LLP's introduced in 2001 vs LLC -- im thinking LLC is probably better seeing as they can be quite slimey characters, im just wanting to build a Themeforest style site, with more social features and job board etc all built in to one instead of going to multiple sites - another feature i want built in - is that developers and designers can team up and split the profits, have to get a quote for the coding side. thanks again neil.