A partnership is a business entity in which two or more individuals or entities combine their skills, resources and money and share the profits and losses. Although most partnerships are between individuals, they can also be between family trusts, unit trusts, and companies.
Partnerships are regulated by the various state based Partnership Acts and the partners’ partnership agreement. Written partnership agreements are highly recommended and should state each partner’s role and level of authority, their expected financial contribution, and procedures for dispute resolution and dissolving a partnership.
A partnership of discretionary trusts is a partnership where each partner is a discretionary trust.
This is a good structure for unrelated parties wanting to operate a business or invest together because:
- Provides each partner with a fixed interest in the partnership say 50% each.
- Allows access to the CGT small business concessions.
- Asset protection (when set up with a company as the trustee of each discretionary trust).
- Flexibility in splitting profits amongst family members.
- Simple to establish and relatively easy to dissolve.
- Partners are not employees so superannuation contributions and workers compensation insurance are not payable.
- Shared management, combined skills, experience and knowledge can produce a better product or service.