Lunfoot Business Services
Understand Your Accounts as a Partnership
When it comes to partnerships, your business accounts can get a little more tricky. There are more people involved as well as different percentages of shares for each partner.
Partnerships can have anywhere between 2 and 50 partners in a firm which means that the ownership of the business could be split up to 50 ways and everything that goes with this – including the business accounts.
So, what do you need to know about your business accounts as a partnership?
In order to pay your taxes as a business, you need to have registered with the HMRC as a partnership. This can be done, here, on the HMRC’s website in under five minutes and is very straightforward to follow.
Much like sole traders, you will only pay tax on your profit – this is the amount you have left once your expenses have been deducted from your income.
Partners cannot deduct business-related expenses from their personal tax return; all business expenses must be deducted from the company tax.
To calculate the amount of profit that your company has made, you can use the profit and loss account. This will allow you to work out the exact amount of profit that is taxable.
The business must complete a partnership tax return but each partner must also complete a self-assessment tax form as well as paying their National Insurance.
As with all forms of tax, there are strict deadlines that must be met. You must complete a tax return to the HMRC at the end of every financial year which is 4th April.
The deadlines for these tax returns are:
31 October for a paper return.
31 January for an online return.
The tax return must include:
The profit and loss account.
Each partner’s share of the profits.
Business expenses can be deducted from your business tax return, but they must be strictly business expenses. These include:
Marketing and promotion.
Equipment and supplies.
Rent or property fees.
Utilities for the business property.
All of these expenses are tracked in your business profits and loss account, this way you can clearly see where and what expenses were used and by which partner.
It is always wise to let a professional take care of your accounts especially if you have a larger number of partners in your firm.