Partnerships (involves two or more people): This gets a little (well actually a LOT) more complicated than a sole trader.

The partnership entity can incur debts both in the name of the partnership (e.g. Smith and Jones) and also against the individual partners.

For example, you order a load of materials and fail to pay; the invoice is in the business name. The supplier can sue you as both the PARTNERSHIP and as Individuals, normally at the same time. It doesn't’t matter who ordered the goods, you are BOTH liable (this is called joint and several liability). This liability is for the entire debt, not your share! As a partner you are liable for ALL the partnership debt.

The business cannot be held responsible for your personal debts BUT if you are personally sued for debt or declared bankrupt then your share of the business may well be at risk as it has a value and is therefore an asset.

It is possible to bankrupt a partnership but not the individual partners. In reality the pursuers (i.e. the creditors) would bankrupt the partnership and then pursue the partners.

It goes without saying that you should think very carefully about setting up any business this way.

From a debt rescue point of view, we see no reason for ANYONE (and especially spouses for that matter) to set up as a partnership. To do so could cost you everything if you get into difficulty. Partnerships can be a nightmare to get out of, think carefully and get our advice BEFORE setting up your business in this manner! Any tax “advantages” could be well and truly insignificant and mean you pay a very high price if you get into financial difficulties.