Partnership of Ltd Company for E-Commerce site

ambilight

Hi,

I'm starting up a new e-commerce site with a business partner. I'm just stumped when it comes to what type of company to form. Should we register a partnership or form a Ltd company?

I was thinking of registering a partnership first and if things take off, then change to a Ltd company. Are there tax/accounting implications to this though. Should we just create a Ltd company with a formations agent and be done with it?

We are both in full-time PAYE employment.
Thanks.

Peterdalkey

There can be tax implications if you go from a partnership to Ltd company, especially if assets have been built up in the business. It is sim,pler to go down the company route from the outset, though more expensive to set up and close down if it does not work out.

Whatever you decide to do, you should definitely have a shareholders or parnership agreement which spells out who gets what, who owns what and who has the rights to acquire the interests of the other and how. It is particularly well defined in most partnership agreements. Google for some sample formats.


cheers

Peter

ambilight

Peterdalkey wrote: »

Whatever you decide to do, you should definitely have a shareholders or parnership agreement which spells out who gets what, who owns what and who has the rights to acquire the interests of the other and how. It is particularly well defined in most partnership agreements. Google for some sample formats.

cheers

Peter

Thanks Peter, would a company formations agent provide us with samples of the above?

There isn't any Fixed assets at all at the minute. We have our own IT equipment and that's about it. I suppose if we do acquire any assets that in the event of the company being disolved it should be outlined something like 50/50 split with an offer to the other person to buy at x%?
I do think the most important part is who has the rights to acquire the interest of the other and how. Nobody knows what's around the corner.

Peterdalkey

ambilight wrote: »

Thanks Peter, would a company formations agent provide us with samples of the above?

There isn't any Fixed assets at all at the minute. We have our own IT equipment and that's about it. I suppose if we do acquire any assets that in the event of the company being disolved it should be outlined something like 50/50 split with an offer to the other person to buy at x%?
I do think the most important part is who has the rights to acquire the interest of the other and how. Nobody knows what's around the corner.

1: Generally not, see http://www.smallbusinessnotes.com/managing-your-business/sample-partnership-agreement.html which covers the topics, which are the same for a shareholders agreenment.

2. Other assets could include debtors, ongoing contracts, equipment bough by the business after incorporation. Then there are liabilities which need to be shared in breakup.

If you sort these in writing before you start, everybody knows where they stand at crying time!, which I hope it will never come to.

Good luck with the new venture.


Peter

Peterdalkey

http://www.inc.com/tools/partnership-agreement-template.html

ambilight

Some great information there Peter, just what I was looking for.

Thanks