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Business Basics - Partnership structure More information

Audio and visual transcript

Scene 1

Visual

The video title Business Basics Partnership Structure slides in from the left of the screen.

The title slides to the right of the screen and is replaced by a person sitting at a desk with a laptop. File folders, a desk lamp and a mug also appear on the table. A clock ticks on the wall. 3 lights hang from the roof and there is a potted plant on both sides of the desk.

A circle appears above the desk on the right with a person standing inside it as “being your own boss” is said.

A circle appears above the desk in the middle with a love heart inside it as “working on the projects you want to” is said.

A circle appears above the desk on the left with a tax form inside it as “being responsible for your own tax matters” is said.

The scene is replaced by 3 circles with a different structure type in them. On the left is SOLE TRADER, in the middle is COMPANY, and on the right is PARTNERSHIP. Each circle expands and contracts as the structure type is said.

The partnership circle expands again as this is what we’re looking at today. An image of 2 people moving together replace the word PARTNERSHIP.

Audio

Music

Cheerful and bubbly music plays during the whole video.

Narrator

Starting your own business can be pretty exciting, being your own boss, working on the projects you want to, and being responsible for your own tax matters.

One of the first things to do, is choose a business structure that's right for you.

The 3 most common business structures are sole trader, company, and partnership.

In this video, we'll look at partnerships.

A partnership is formed when 2 or more people get together to run a business.

Scene 2

Visual

A partner appears on each side of the screen, arrows extend out from each of them and move towards the middle of the screen.

A circle pops up in the middle with a dollar symbol and an arrow pointing up for profits, then an arrow pointing down for losses.

An exclamation mark replaces the dollar symbol, and smaller circles with exclamation marks appear above each partner’s head showing they are both personally responsible for all partnership debts.

Audio

Narrator

Each partner contributes something to the partnership.

In return, they receive a share of any partnership profits, or losses.

Each partner is personally responsible for all partnership debts.

If the partnership can't pay, the creditor can approach any of the partners individually to collect the money owed.

Scene 3

Visual

Jamie appears on the right side of the screen, Denise appears on the left. A scene builds around them, 2 desks with a computer and chair each, a clock and a bookshelf hang on the wall, a plant basket hangs from the ceiling.

The camera zooms to the left computer screen. A circle with PARTNERSHIP is shown, from behind this a circle with IRD NUMBER slides out to the right.

The circles are replaced with our ird.govt.nz web address.

A form appears showing Denise is completing the name and contact details section

for her and Jamie. The screen changes to a big tick.

The camera zooms back out to the room, a calendar appears highlighting 31 March as that’s the standard balance date for a partnership.

A circle appears with a Partnership income tax return – IR7 in it, which is then replaced by a dollar symbol with an arrow pointing up for a profit, then an arrow pointing down for a loss. The circle is divided in half showing a 50/50 split in the partnership profit or loss between the partners.

Audio

Narrator

Meet Jamie and Denise.

They’ve decided to form a partnership to design websites.

A partnership has its own IRD number.

Denise applies for the IRD number online at ird.govt.nz.

She uses the names, addresses and personal IRD numbers for both her, and her partner Jamie in order to apply.

After the end of the tax year, that’s the thirty-first of March, Jamie and Denise’s partnership files a partnership income tax return, called an IR7, showing the profit or loss for the year, and how it's split between the partners.

Jamie and Denise have the standard thirty-first of March balance date, so they file their return by the seventh of July.

Scene 4

Visual

We move to a new room with Jamie on the left waving, and Denise on the right holding a laptop.

A circle with $100,000 appears in the middle of the screen, a smaller circle with $50,000 appears above each partner’s head.

$100,000 is replaced by a cross and each $50,000 is replaced by a tick as the partners pay income tax on partnership profits, not the partnership itself.

Each tick is replaced by an Individual tax return – IR3 which is the income tax return both Jamie and Denise need to file.

A calendar showing the month of February replaces the circles on the screen.

Audio

Narrator

During the tax year, the partnership made a profit of 100,000 dollars.

As Jamie and Denise agreed to split the profits fifty-fifty, they each receive 50,000 dollars.

But partnerships don't pay income tax, the partners do.

So Jamie and Denise each complete an individual tax return, called an IR3, showing they received 50,000 dollars from the partnership as their share of the profit.

They have a bit of tax to pay and they pay it before February the following year.

Scene 5

Visual

Some of the tools and resources available to you appear in 4 circles.

From left to right, the circles contain:

  • useful tools and resources from business.govt.nz
  • GST returns as you must register if your turnover is more than $60,000
  • our ird.govt.nz web address
  • our myIR logo.

Audio

Narrator

A few final things to remember before we wrap up.

For useful tools and resources for businesses, including a tool to help you choose your business structure, visit business.govt.nz.

All businesses with sales of more than 60,000 dollars must register for GST and file GST returns.

Our website ird.govt.nz has lots of useful information for people in business to help you get it right from the start.

And if you don’t already have a myIR account, set one up via ird.govt.nz so you can file your returns online and send us secure emails.

Scene 6

Visual

The video ends showing our web address ird.govt.nz and then our logo.