It is important for partners to remember that they are jointly responsible for the partnership`s debt. This “unlimited liability” is one of the reasons for the growing popularity of the Limited Liability Partnership (LLP). In most cases, the partnership begins with the couple without formal agreement. However, it is important that you establish a formal agreement if you anticipate that the business is a primary source of income and not just a hobby. It is only when two partners discover who they really are and feel good about each other`s skills and strengths that the business can thrive. Family partnerships are not always lethal. When they work, they tend to get stronger over time. If you are a member of a partnership, it is worth reading the Partnership Act 1890 carefully. Although a partnership can and should have its own written partnership agreement, if such an agreement does not exist or does not cover all possible commercial situations, the provisions of the Partnership Act are a priority. If the partnership agreement does not say otherwise, the presumption of the Partnership Act is that all the assets of the partnership are held equally by all partners. On the other hand, if each spouse owns a portion of his or her own capital (or shares, shares, membership shares – whatever the term applicable to your situation), you need a partnership contract.
The agreement is intended to protect not only both spouses, but also the value of the business. You should always have a formal agreement when you go to work with another person, even if you are a man and a woman. This structure was reviewed in 2005 by the ATO in its Refocus of the income-splitting test case program and recognized as legitimate, given that both partners are exposed to liability for partnership debts, so both parties should share the rewards. Craftsmen who use spouses can generate significant tax savings if a spouse has a low income or no other income. If you and your spouse co-own the business, but do not include or create an LLC, your business will generally be a general partnership. Generally, this has two of you to share 50/50, but other percentages are an option.