Hi-tech start up - incorporate or partnership?

[funkihamsta]

I am looking to into starting a business in partnership with one other person. We will both be initially funding the business ourselves and will both have an active role in its development.

Incorporating seems to be the most straightforward method of doing so but we have had discussions regarding the perception of the business itself. Am l right in saying that ltd companies lose credibility as it indicates and unwillingness by the owners to risk their own assets in the venture. We wish to be taken seriously rather than a couple of chancers...there's plenty of those already.

[Eric Mc]

The opposite in fact. Limited companies tend to have MORE credibility compared to sole traderships or partnerships. There are also more personal risks with a partnership, more than even a sole tradershhip as you could find yourself liable for debts incurred by your partner as well as your own.

The downside of a limited company is that is technically more complex (and therefore more costly) to run.

[funkihamsta]

Hmmm never simple.
If this is the case why are legal firms, accountants and other "professional" entities partnerships?

[GreenV8S]

I think the answer is that in those cases the customers contract with an individual person not with the company. That doesn't apply to IT.

[Eric Mc]

Up until fairly recently, professional firms were prohibited from incorporating or seeking limited liability. It marked out the difference between a "profession" compared to a "business" (you wouldn't be too enthiused if you discovered your GP was hiding behind a corporate set up).

However, accountants, solicitors, architects etc can now form limited companies or limited liability parnerships (LLP).

[funkihamsta]

You could argue that you wouldn't be happy to see anyone giving you incompetent advice/service and hiding behind a company. Something which happens all the time funnily enough!

Thanks for the replies.

[Eric Mc]

You could argue that if you want but in my experience, it rarely happens.

There are also tax reasons why a lot of businesses prefer to deal with companies rather than individuals.

[funkihamsta]

Cheers Eric.