Deciding what is best between a partnership and a company will be dependent on a range of different circumstances. A company has to be registered on Companies House and will have to publish annual accounts, whereas a partnership only has to register itself with HMRC. A company has limited liability. This means that if they are sued or owe any debts, the only thing that can be recovered is the company assets and not the shareholders personal assets. With a partnership, your personal assets are on the line as you’re personally liable. In addition, they’re also tax benefits to both. For example, a company will only pay corporation tax, whereas partners don’t always pay National Insurance on their earnings. It’s best to take advice from an accountant on what’s the most tax efficient way of running your business. Finally partners are entitled to take their pay out of the profits of the company, whereas shareholders take their earnings by way of dividends.
