The Simple Partnership: Contract, Tax and Estate Planning

What Is a Simple Partnership?

It is a contract between at least two partners. Each partner brings something in: money, an asset or know-how. The aim is to share the profit or the financial benefit that results. Under the Belgian Companies and Associations Code (CSA) of 2019, its French name is société simple, and in Dutch it is the maatschap.

Its key feature fits in one line: a simple partnership has no legal personality. It therefore owns nothing in its own name. The assets brought in remain in joint ownership between the partners.

Why choose such a light form? Because it costs little and leaves wide freedom. But that freedom comes at a price, since the partners enjoy little protection.

Setting Up: A Contract, No Notary, No Publication

Setting up a simple partnership involves very few formalities:

• No notarial deed: a private written agreement is enough.
• No publication in the Belgian Official Gazette.
• No minimum capital.
• No financial plan imposed by law.

However, watch the Crossroads Bank for Enterprises (CBE). Depending on the activity, registration may become necessary. An approved business counter confirms this before you start, and our guide to CBE registration walks through the steps. The FPS Economy also explains the role of the CBE.

A written contract still remains essential. Without clear terms, every disagreement quickly turns into a dispute.

Liability: The Real Weak Spot

Partners answer for debts with their personal assets. Their risk therefore does not stop at their contribution. For example, a loan taken out to renovate a shared building also reaches the partners' private wealth.

Before signing, have an adviser check how debts would be split between you. For this reason, a simple partnership suits risky activities poorly. If the project may create large debts, an SRL (limited liability form) protects you better. Our article on choosing between sole proprietorship and SRL helps you compare.

The SNC and SComm forms rest on the same foundation. Unlike it, though, they have legal personality.

Common Uses of the Simple Partnership

Estate Planning

This is the best-known use. For example, parents contribute a securities portfolio or a building. They then give shares to their children. Thanks to the contract, they stay on as managers and keep control of decisions.

Thus the children receive the value, while the parents keep control. The gift of the shares follows the tax rules of the region concerned. Still, the tax authorities can challenge a purely tax-driven scheme. A notary or wealth adviser therefore secures the operation.

Managing a Family Property

Family members sometimes own a property together. A simple partnership then organises its management better than plain joint ownership. The contract states who decides, who pays for works and how someone can leave.

Pooling Resources Between Professionals

Doctors or architects sometimes share a practice. A simple partnership lets them split rent, secretarial support and equipment. Yet each partner keeps their own clients and income.

Tax: A Transparent Structure

A simple partnership pays no corporate income tax. It remains tax transparent. Each partner reports their share of income under personal income tax. Several cases arise:

• Dividends and interest bear withholding tax.
• Rental income follows the rules for property income.
• A professional activity produces professional income.

Transparency therefore creates no automatic advantage. Above all, it avoids a double layer of tax. Your accountant then checks the exact treatment of each type of income.

Essential Clauses in the Contract

A good contract anticipates conflicts. At a minimum, it covers:

Mistakes to Avoid

Three mistakes prove costly:

• Signing nothing in writing, then discovering opposite visions.
• Forgetting that private assets answer for debts.
• Overlooking a possible CBE registration.

Finally, keep a written record of every important decision.

Should You Set Up a Simple Partnership?

Yes, if the project mainly holds assets or carries little risk. In contrast, an exposed commercial activity calls for a limited liability structure. Juristelo helps you compare these options with real figures. A financial plan quickly shows whether a simple partnership is enough or whether an SRL makes more sense.