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Partnership

A Partnership tax structure is basically 2 or more separate legal entities joining together to run a business. The two or more entities can be comprised of any type of tax structures. They can even be 2 or more companies joining forces 鈥 the fundamentals of the structure do not change.

Partnerships are more risky because you have to multiply personal liability by the number of people or businesses involved. In cases of joint liability, if a partner or partners cannot pay their share of a debt, the other is liable to pay both or all shares.

Like a Sole Trader, the cost to set up a Partnership is inexpensive. It鈥檚 also easy to manage administratively, as the regulations are relatively simple. Each person or business entity (partner) will share in the profits or losses of the Partnership on their own tax return. They鈥檒l then pay a marginal tax rate on that share, the rate being determined by how much other income the person or entity has earned.

Partnership and Sole Trader tax structures are good for start-ups and small businesses when your total income is less than $80,000 per year. Be aware, in terms of 鈥楾ax Planning鈥, neither is a very flexible option.