A partnership is a form of collaboration between two or more people. Formally, a partnership is not one organization, but cooperation can take place as if it were one organization. This legal form is often used by people with a liberal profession, also called the partners. In principle, they work for themselves, but do sit together. Sometimes they hire staff who work for all sizes. The input of the measures can consist of labor, capital or goods. Examples of partnerships are general practitioners, law firms, an interpreting center and a dental practice. Two spouses can also be part of a partnership.
Establish a partnership
A partnership consists of a group of independent entrepreneurs. They continue to work for themselves, but seek collaboration for certain aspects of their work. This could be a communal accommodation, a reception with staff, or expensive specialist equipment shared by the different sizes. A partnership can be formally named and thus publicized. But it is also decided to work together in silence. Such a silent partnership does not have to register with the Chamber of Commerce. A partnership that comes out is obliged to do so.
To confirm an appointment
The partners that enter into a partnership make agreements in advance about how they will do this. Despite the fact that there is often a good relationship of trust between these partners, it is recommended that these agreements be formally recorded in a deed. All kinds of things are described in that deed. For example, it states what the contribution of the various measures is and what value it represents. Another topic is profit distribution. In this way it can be arranged that the effort for the partnership is related to the percentage of the profit that is distributed. This prevents the full gain from going to one of the bars.
In a partnership, each partner can perform actions that are considered part of the normal activities in the partnership. Consider, for example, replenishing stocks. If nothing is agreed about this, any partner can do this, but it is also conceivable that this is a task that is assigned to one person. Other transactions must be performed jointly by the partners. This includes concluding contracts for utilities and approving design drawings when expanding the office space. It is wise to record these agreements in advance. It is also very important to discuss in advance what will happen when the partnership is terminated.
It is not mandatory to draw up a partnership contract prior to the formation of a partnership. This is done in the vast majority of partnerships. Such a contract, which is often drawn up under the guidance of a legal adviser or a lawyer, can be very useful. Everyone then knows what the agreements are regarding powers, obligations and the distribution of the profit. Such a contract is also valuable externally. The tax authorities in particular, but also business partners regard such a deed as proof of quality and reliability.
Conflicts in the partnership
Despite the partners' good intentions, there may eventually be some friction in the cooperation within the partnership. That can lead to conflict. For example, if one of the partners wants to continue to share fully in the profit, while his share in the partnership decreases because he works fewer hours there. Or if a partner starts a competitive company in addition to his work for the partnership. It also happens that a partner no longer wants to be part of the partnership, but that the other partners do not agree with his departure.
Other conflicts that may arise often concern the functioning of the partnership. Then, for example, there is murmuring about the way in which the activities are carried out, about the marketing or about the financial ins and outs of the partnership. Such conflicts directly affect the livelihood of the individual sizes. It is therefore very important that these are resolved as soon as possible. If that does not work internally, it can help to call in a lawyer. Possibly, this can force a solution on the basis of the partnership contract.
Not every partner is equally involved in the partnership. This is important when arranging the partners' liability. In a partnership, each partner is liable for a proportionately as large part as in which he contributes to the partnership. In that sense, the liability is a lot less than that of a partner in a general partnership . A partner in a partnership is 100% liable for the entire deficit of the partnership with his private assets.
There are exceptions to this unequal division of liability in a partnership. This is the case, for example, when it comes to a joint action, such as renting a communal space. In principle, only the partner concerned is liable for other agreements in a partnership. Unless the other partners have authorized him to do so, a partner cannot enter into obligations for the other partners. Despite the fact that only one partner can be held liable for an agreement, it is possible that the partnership as a whole can claim compliance with an agreement.
A partnership and the tax authorities
For the tax authorities , everyone who is part of a partnership is an entrepreneur. Just like an entrepreneur who works solo in a sole proprietorship , the partners in a partnership must pay income tax on their business income. They can make use of various deduction options, such as the self-employed person's allowance, the starter's allowance and the SME exemption. A condition for the self-employed person's allowance is that you work for your company for 1,225 hours per year. You are entitled to the starter's allowance if you have not had a business for at least one year in the past five years and are entitled to the self-employed person's allowance. In addition, as an entrepreneur you may still deduct 14% of the taxable profit in the context of the SME exemption.
If you work in a partnership with your partner and both are self-employed, you can benefit even more from these deductible items. You may then divide the profit between both persons. That means that you get double tax benefits. Finally, there is also the small business discount. You get that if you have to pay less than $ 1,883 in VAT annually. The partnership itself must pay VAT on the services and goods supplied. If personnel are employed, the partnership must also pay wage tax.
As an entrepreneur with a partnership, the profit is paid to your own company. Because you pay income tax on this, you automatically pay for the national insurance contributions. On this basis, you are entitled to AOW after your retirement. Because AOW is only a fairly low benefit, it does not hurt to arrange a supplementary pension yourself. To keep the premium a little affordable, it is recommended to start as early as possible.
Whether you are entitled to employee insurance schemes such as the WW, WIA and Sickness Benefits Act depends on the legal form of your own company. If you have a sole proprietorship, you are not entitled to, for example, disability benefits and unemployment benefits. That is a considerable risk in some professions. It is therefore recommended that you take out disability insurance yourself. Anyone who has placed their own company in a BV does contribute to the premiums for employee insurance. In that case, you are entitled to benefits in the event of disability and unemployment under certain conditions.
Termination of the partnership
It is regulated by law that a partnership is automatically dissolved if one of the next one five events occurs. Firstly, if it concerns a partnership that has been entered into for a definite period of time and that time has passed. Second, when the goal of the partnership has been achieved. Third, if one of the bars does not want to continue. Fourth, if one of the partners can no longer continue his activities. This is the case in the event of death, bankruptcy and if the company of that partner is under guardianship. Finally, a partnership can also be dissolved by a court, but this is only possible if there are compelling reasons for doing so.
If termination is imminent because one of the partners wants to resign or upon the death of one of the partners, resignation can be prevented by the other partners. This is easiest if agreements have been made about this at the start of the partnership, which are laid down in the partnership contract. Without such agreements it is much more difficult to continue the partnership. In those cases, the assistance of a lawyer or lawyer is usually required to save the partnership.
Differences between a partnership and a general partnership
A partnership and a general partnership (VOF) are very similar in legal form. But there are also a number of differences. This has to do with liability, among other things. In a VOF, the partners are jointly liable for all debts. If a fellow partner incurs debts, you are also liable. The partners of a partnership are only partially liable, but with their business and private assets. If a client has commissioned only one partner, he can choose to hold only that partner liable.
Another difference between a VOF and a partnership consists of the types of professions that choose one of the two. Craftsmen, who make products in collaboration with others, such as construction workers, masons, plasterers, carpenters, furniture makers, etc. usually opt for a VOF. The business owners are responsible if debts arise. Entrepreneurs with liberal professions, such as physiotherapists, dental hygienists, lawyers, etc. often opt for a partnership. They continue to perform their profession independently, but work together in the field of facility support. Debts are distributed evenly. As a result, partners run less financial risks than partners.
Agreements between a VOF and a partnership
There are many similarities between a VOF and a partnership. Both are based on cooperation agreements between entrepreneurs and can employ staff. A new legal entity is not created in either of the two legal forms. A VOF and a partnership must be registered in the trade register. Not a 'silent' partnership. When establishing a partnership and a VOF, it is not necessary to have a notarial deed drawn up. Another similarity has to do with the way in which the Tax and Customs Administration views the participating entrepreneurs. The Tax and Customs Administration sees partners in a VOF and partners in a partnership as independent entrepreneurs. They each have to pay income tax for themselves.
A VOF and a partnership both have to pay VAT. This is not done by the individual entrepreneurs in the partnership. This is because the Tax and Customs Administration looks at the whole of the company. The declaration must therefore be made by the VOF and the partnership. Because the accounting for the entire VOF or partnership is also done centrally, the participating entrepreneurs can share the costs of an accountant. Social insurances are also the same for participants in a VOF and a partnership. They are governed by national insurance laws. Whether a participant is insured for medical expenses and pension depends on the legal form of his own company. A sole proprietorship is not insured for this; a private company does.
Advantages of a partnership
Although a partnership is an attractive legal form for a partnership of several entrepreneurs, it is used relatively little. That in itself is quite strange, because there are many advantages. A partnership is quick and easy to set up without the need for start-up capital. As a 'measure' you benefit from the input of the other measures. As an organization, a partnership can hire staff itself, who can be supportive of all sizes.
In terms of income, a partnership is also an attractive option, especially since you as a partner are only partially liable. How large that part of the liability is depends on your contribution to the partnership. Your earnings from the partnership are paid out as profit to your own company. You are regarded by the Tax Authorities as an entrepreneur, which means that you can benefit from deductible items such as the self-employed person's allowance, starter's allowance, SME exemption and the small business scheme. Naturally, there are conditions attached to each deductible item. After your retirement you are entitled to AOW.
Disadvantages of a partnership
There are also some drawbacks to a partnership. One of these is that you cannot go your own way as an entrepreneur. You must adhere to the agreements made with the other partners. This means that you regularly have to meet to discuss the ins and outs of the organization. But for the time you invest in this, you will also get the necessary back from the other sizes. Another disadvantage of a partnership is that your private assets count towards the liability. If you do not have a prenuptial agreement, this also applies to the assets of your partner.