A partnership is a business structure that involves a number of people who carry on a business together. You may choose a partnership over a sole trader structure for example, if you'll be jointly running the business with another person or a number of people (up to 20). There are two types of partnerships - general and limited. Partnerships are governed by the relevant law depending on your state or territory:
- ACT - Partnership Act 1963
- NSW - Partnership Act 1892
- NT - Partnership Act 1997
- QLD - Partnership Act 1891
- SA - Partnership Act 1891
- TAS - Partnership Act 1891
- VIC - Partnership Act 1958
- WA - Partnership Act 1895.
Key aspects of a partnership structure
- It's relatively easy and inexpensive to set up.
- It requires a separate Tax File Number (TFN).
- If you are carrying on an enterprise, you can apply for an Australian Business Number (ABN) but this is not compulsory.
- It's not a separate entity - like a sole trader, you and your business partners are personally liable for the debts of the business.
- You have shared control and management of the business with your partners.
- The partnership doesn't pay income tax on the income earned. You and each of your partners pay tax on the share of the net partnership income you each receive.
- Requires a partnership tax return to be lodged with the Australian Taxation Office (ATO) each year.
- Each partner is responsible for their own superannuation arrangements - you are not an employee of the partnership.
- You must be registered for GST if the annual income turnover is $75,000 or more.
- Read more about partnerships and tax on the ATO website.
- Browse the Australian Securities and Investments Commission website for information on business structures.
- Read our Changing business structures section if you're thinking of changing your structure.
- Find out more on different types of businesses in our Business structures and types topic.