Am I right in saying that if a sole trader decided part way through his financial year that he wanted to take on a partner he would have to prepare cessation accounts for the sole trader business.
i.e. he can't just add a partner and continue as normal?
I think he would have to cease and register the new partnership with HMRC
I believe one used to be able to elect for cessation but as long as the business is similar in nature there is a continuing business. You would, though need to register the partnership.
From our experiences of going from sole trader to Limited Liability Partnership to full Limited Company, the first step is simplest.
We were simply advised that up until the date you are a sole trader, you keep a set of accounts which needs to be declared as sole trader self employed income.
Then rom the date of the change to partnership start keeping a new set of records. If you change to partnership part way through a tax year and your accounts ran from the same dates, then you will fill in your own self assessment return with a self employment page and a partnership page declaring your share of the partnership income.
Clearly they need to also contact HMRC to register the partnership as well, as they will need a UTR number for the partnership to file the partnership tax return and both partners must be registered as self-employed.
Yes, you need to register the partnership with HMRC and, in effect, you will have 3 tax returns to do and file.
If you were going down this route, I would recommend incorporating the business which has better tax advantages for both of you - and could be less costly in producing accounts than 3 tax returns would be.
