You need to define the company line
WHAT is the true purpose of a "limited partnership" and what are the advantages of this structure over a company?
WHAT is the true purpose of a "limited partnership" and what are the advantages of this structure over a company?CHOOSING a business structure can be very confusing. Most people just go with the default "company" structure because they don't really understand their options.A limited partnership is permitted under the Partnership Act and it is a unique structure in that it overcomes the difficulty with partnerships having unlimited liability between the partners and each partner's responsibility for the actions of others in the partnership.Here's an example. Say you own a restaurant with four other partners and one of the partners commits to buying a wine cellar for many thousands of dollars without anyone else's consent. The wine is delivered and the other partners are furious with the decision and want it sent back. If the wine merchant deems the goods to be sold and doesn't accept the return of the wine, all the partners are jointly and severally liable for the debt. That is, of course, unless you have a limited partnership structure.A limited partnership is registered similarly to a corporation but it limits the liability of partners to the extent of the funds contributed by the partners. In other words if you invest $100,000, you do so knowing that will be the only investment you can lose. The structure effectively caps your exposure to the world.From a tax point of view, a limited partnership is good in that profits and losses of the partnership are the responsibility of the partners, which means that each partner takes the partnership income or loss according to their unique tax position. A partnership can distribute taxable losses and if the business is in its set-up phase or incurring losses for business expansion, these losses can be offset against the individual's income. In a company or trust, tax losses remain with the company or trust.MY BUSINESS is coming up to a busy period and I need to increase staff levels, at least temporarily. I am considering taking on either casual employees or sub-contractors, but am unsure of the best option. Could you advise me on factors to consider for each?FROM a legal perspective, there are many occupation awards that cover minimum payments to be made for casual employees.So your starting point should beto look at the award for your particular occupation and this will provide you with the minimum cost.The law does not make it easy to hire sub-contractors when they are for all intents and purposes employees. Employees' rights mean it's not easy to categorise someone as a sub-contractor.Taxation, superannuation, payroll tax and workers' compensation legislation cuts through all layers of agreement and on many occasions deem sub-contractors to be employees. In common law, you may think that you have a sub-contractor but if there was an accident or death, you'd have real difficulty proving that they weren't an employee.If you're looking to use sub-contractors because you don't want the headaches associated with short-term employees, my advice would be to seriously consider a labour hire firm. The labour hire firm can be responsible for ensuring compliance with the myriad laws covering employees.Apart from legal considerations and putting all the expenses and logistics aside, if you're looking for a minimal skill set, I'd say your best option is to go for casual workers. If you need a job to be completed that's more skill-oriented and will reflect on your business reputation as a product or service provider, I'd suggest getting some quality sub-contractors on board.Mark Bouris is executive chairman of wealth management company Yellow Brick Road. His advice here is intended as guidance only.If you have a question, email it to Larissa Ham at email@example.com