You have decided to go into business with one or more other people. Maybe you are two founders with complementary skills, or a family group pooling capital and labour. If you have weighed the business structures and chosen a partnership over a company, the next question is a practical one: what do you actually have to do to get the partnership trading lawfully? This article walks through the process in the order the registries and the tax office expect it, and flags the decisions you should make before you touch a single form.
By the end of the process you will have an ABN in the partnership's name, a business name registered with ASIC (unless you trade under the partners' own names), the tax registrations the partnership needs, a bank account in the partnership's name and any licences your industry requires. One thing to understand up front: there is no central register of general partnerships in Australia. A partnership comes into existence by agreement, not by lodgement, and NSW's guidance notes that most partnerships are ordinary partnerships that do not need to be registered at all. The registration work is really about the ABN, the business name and the tax and licence registrations that let the partnership deal with customers, banks, suppliers and the ATO. The one thing no form will fix for you is the agreement between the partners: if you do not have one, the state Partnership Acts write the terms for you, and most people do not like the terms they write.
Before You Start: The Prerequisites
Work through these before you start registering. Each one changes what you put in the forms, and a couple of them are where partnerships most often go wrong:
- The identity of the partners: A partnership can be made up of individuals, or entities such as companies and trusts, or a mix of both. The choice affects how the partners are taxed and what each is personally exposed to, so it is worth tax advice before you commit. If any partner is an entity, you will need its ABN and details for the partnership's own ABN application.
- Agreed fundamentals: how profits and losses are shared, what capital each partner contributes, who manages the day to day business and who can sign documents on its behalf. If you have not agreed these in writing, the default rules in the state Partnership Acts apply. Under s 24 of the Partnership Act 1892 (NSW), for example, partners share equally in the capital and profits and must contribute equally to losses, unless the agreement says otherwise. The Act also implies other terms, such as an obligation on the firm to indemnify a partner for payments made in the ordinary conduct of the business.
- A check on numbers: a partnership formed for profit with more than 20 members is prohibited unless it is incorporated, under s 115 of the Corporations Act 2001 (Cth). The regulations can set a higher cap for particular kinds of partnerships, such as some professional firms. The limit is not a problem for most small businesses, but count every member before you start, because a partnership that breaches the cap is not something you can fix by registration.
- A decision about the business name: you can either trade under a name that is registered with ASIC, or trade under the partners' own names. Trading under the partners' own names needs no registration, but only if the name consists of all of the partners' names. "B Smith & J Smith" is fine for a two-person partnership of those names; "Smith's Plumbing" is not, because it is a name, not simply the partners' names.
- Documents on hand: the tax file number of every partner, and the ABN of any entity partner. The Australian Business Register asks for these when the partnership applies for its ABN, and the application stalls if they are not ready.
- Consider whether you need a limited partnership: in a general partnership every partner is personally liable for the firm's debts and obligations, jointly with the other partners, and jointly and severally for wrongs committed in the course of the business. If you want a partner, often a silent investor, to have capped liability, you need a limited partnership, and those must be registered with the relevant state or territory authority. In NSW, for example, registration is with NSW Fair Trading. Most new small-business partnerships are general partnerships and need none of this.
The Registration Steps in Order
Once those decisions are made, the steps below follow in the order the registries and the ATO expect them. The ABN comes first because every later registration references it, and you need an ABN before you can register for GST.
Register the Partnership's ABN With the ABR
The partnership applies as a single entity for an Australian Business Number (ABN) through the Australian Business Register at abr.gov.au. The ABN is the 11-digit identifier that lets the partnership invoice customers, deal with the ATO and be found on the ABN Lookup. There is no fee for the application, and here is what you need, what you get back and how long it takes:
- What you need: the partnership's business details, the TFN of each partner, and the ABN of any entity partner. The ABR also checks that the partnership is actually entitled to an ABN, which means it must be carrying on or starting an enterprise in Australia.
- What you get back: an 11-digit ABN recorded against the partnership's name on the Australian Business Register. The same ABN is used for the partnership's GST registration later.
- Timing: if the details you provide match ATO records, the ABN is usually issued immediately. If not, the application goes for a manual check and can take longer, so get the partners' details right the first time.
You can apply for the ABN at the same time you register a business name, or at a later time. What you should not do is apply for the ABN as an individual and then trade the partnership through it, because the ABN identifies the entity that carries on the business, and the partnership is that entity, not any single partner.
Register a Business Name With ASIC
If the partnership trades under a name rather than under all the partners' own names, that name must be registered as a business name with ASIC through ASIC Connect. Under s 18 of the Business Names Registration Act 2011 (Cth), carrying on a business under an unregistered name is an offence carrying a penalty of 30 penalty units. The same section exempts a partnership that trades under a name consisting of all of the partners' names, which is why the "B Smith & J Smith" example needs no registration. Here is what you need, what it costs and what you get back:
- What you need: the chosen name, checked first through ASIC Connect to confirm it is available and does not contain restricted words, plus the partnership's ABN.
- What it costs: currently $44 for one year or $102 for three years. The fees are set under the Business Names Registration (Fees) Act 2011 (Cth) and are indexed each year from 1 July, so the figures move with inflation.
- What you get back: the name recorded against the partnership on the Business Names Register, with a renewal obligation at the end of the period you paid for.
The registration is national, so a name registered through ASIC covers the whole of Australia and does not need to be registered separately with any state or territory.
Register for GST and Other Tax Obligations
With the ABN in place, sort out the partnership's tax registrations. The main ones are the tax file number, GST and pay as you go (PAYG) withholding:
- Tax file number: the partnership needs its own TFN, separate from the partners' personal TFNs, so it can lodge the annual partnership return. A partnership does not pay income tax on its profits; each partner is taxed on their share of the partnership's net income in their own assessment. But the partnership still lodges a return, and it needs a TFN to do so.
- GST: the partnership must register for GST if its GST turnover is $75,000 or more, or if it is likely to reach that threshold in its first year of operation. The GST turnover is total business income, not profit, and excludes GST itself. Once turnover crosses the threshold you have 21 days to register. If you do not register when required, you can be liable for GST on sales made since the date registration was required, even though GST was not included in those prices, and penalties and interest can follow.
- PAYG withholding: if the partnership employs staff, it must register for PAYG withholding so it can withhold an amount from each employee's pay and forward it to the ATO.
GST registration is optional below the threshold. Many new partnerships choose to register early anyway so they can claim GST credits on start-up purchases, but if you register voluntarily you generally must stay registered for at least 12 months.
Open a Bank Account in the Partnership's Name
Open a separate account in the partnership's name rather than in any partner's personal name. Banks will ask for the partnership's ABN and, where one is registered, its business name, and some will want to see the partnership agreement as evidence of who is authorised to operate the account.
The account serves two purposes. It keeps business income and expenses separate from the partners' personal money, which you need for accurate records, GST reporting and the annual partnership return. And it gives the partnership a verifiable financial footprint, which matters when you apply for credit or deal with larger suppliers. The partnership agreement can specify who has authority to access the account, and banks will follow the signing instructions you give them.
Check the Licences Your Industry Requires
The registrations above make the partnership a recognised business. They do not necessarily make it legal to trade. Depending on the industry, the state or territory and the local council, the partnership may need licences, registrations or approvals before it can start operating. Regulated trades, food businesses, child care, transport and a range of other activities all carry their own requirements.
The Australian Business Licence and Information Service (ABLIS) runs a free questionnaire that produces a list of the licences, registrations and approvals relevant to your particular circumstances. Run through it before you spend money on equipment or premises, because a licence that takes months to obtain can hold up a launch that the ABN and business name steps will not.
Where Partnerships Get Held Up
Most of the friction in this process comes from a handful of recurring mistakes, and each is cheaper to fix before you lodge a form:
- Applying for the ABN as an individual: the ABN must be in the partnership's name, or your invoicing, GST and tax returns will not line up with the entity you actually created. Fixing it later means cancelling and reapplying.
- Misreading the business name exemption: the exemption covers a name made up of all the partners' names. Drop one partner's name out of the trading name and the name needs registration, with the s 18 penalty lurking if you trade on it anyway.
- Leaving GST until the end of the year: once turnover crosses $75,000 you have 21 days to register, and a late registration can make you liable for GST from the date registration was required, plus penalties and interest on top.
- Skipping the partnership agreement because there is no form: the statute fills the gap with equal shares of profits and equal shares of losses, which is rarely the deal you agreed to in conversation.
When a Lawyer Should Be Involved
You can complete the registrations yourself, and many partnerships do. The two things that most often go wrong, the structure of the partnership and the agreement between the partners, are exactly the things a lawyer handles.
A commercial lawyer would draft the partnership agreement so it covers capital contributions, profit and loss sharing, decision-making authority, how documents are signed, dispute resolution, and what happens on the death, retirement or bankruptcy of a partner, on the admission of a new partner, and on dissolution. Without those terms, the default rules in the relevant state Partnership Act govern, and the defaults are blunt instruments.
A lawyer would also advise on whether the partners should be individuals, companies or trusts, and on the liability and tax consequences of each. Where a partner wants capped liability, a lawyer can prepare and lodge the limited partnership registration with the relevant state or territory authority, which in NSW means NSW Fair Trading and its partnership registration forms. Lawyers routinely work with your accountant on the tax side, since the choice of who the partners are drives how the profits are taxed.
If the ABR or ASIC rejects an application, or the business name you want is taken, a lawyer can also work through the alternatives with you rather than leaving you to restart the process.
Start With the Agreement, Not the Registrations
The registrations are mechanical: forms, fees and waiting times. The step that most determines whether the partnership succeeds is the one with no form, no fee and no deadline, the written agreement you make before you register. If you skip it, the Partnership Act writes your terms for you, equal shares of profit and equal shares of loss, and any disagreement about who decided what, who contributed what, or what happens when a partner leaves is resolved against whatever the statute happens to provide. A few pages signed before launch will settle more disputes than any registration you can file afterwards.
The process itself is short. Agree the scope of the partnership and the terms between the partners first, then register the ABN with the ABR, register the business name with ASIC unless you trade under all the partners' own names, sort out the TFN, GST and PAYG registrations, open a bank account in the partnership's name and check the licences for your industry through ABLIS. A commercial lawyer can draft the agreement and advise on the structure, and that is where the real protection lies.