If you run a business, it important to understand what is the type or structure of your business. Sometimes business types are changed by your accountant for accounting and tax reasons without the business owner being aware of the consequences.
One of the reasons why it is important to know whether your business is a partnership, is that if it becomes insolvent and needs to be wound up, different rules apply to different types of business. So if you are a partner in a partnership business, the rules that apply if it becomes insolvent are different to the rules that would apply to other types of business (such as a limited company or a limited liability partnership). Every year, hundreds of partnership businesses in and around Leeds become insolvent and many are wound up – usually because that is the best option, but sometimes because the other options have not been properly explored.
If a partnership needs to close because it is insolvent and it cannot continue to trade, one option is to wind up the partnership. There are other options available if the partnership is able to trade profitably in future but is currently weighed down by debt and unpaid bills. It is therefore vital to take expert advice as soon as your partnership business begins to struggle, as there may be a number of options to explore depending on the situation. These options will include winding up the partnership, but there are several other options which should also be explored.
I think my partnership business is insolvent and needs expert advice – what do I do next?