A NOTE ON THE
PROBLEMS OF PARTNERSHIP

Word and Action Community Theatre and Writing Group

The experience of Word and Action (Dorset) - a community theatre and writing group with which I worked from 1973 to 1977 - may be of some value to people trying to decide what form of co-operative organisation they should set up. At least it shows very clearly that the one structure to be extremely wary of is 'Partnership'.

We began as a couple of ex-teachers, living on cashed-in superannuation and a bit of dole, working in a totally ad hoc way to set up performances and courses in community theatre around a rural county. One of us had always been 'employed' - i.e. paying his tax via PAYE; the other had done this as well, but also has a small income as a writer, and used an accountant to sort out the few tax problems that there are in relation to this money. Both of us were very concerned to avoid defining any structure for ourselves as much for ideological reasons as for any other; we believed in free-flowing ideas in the work we were doing, and were determined that our organisation should embody this at the most fundamental level. It seemed the consistent thing to do - as it might to many resettlers.

This meant that, in practice, apart from keeping accounts (with very little income to record during the first few months, but special columns which showed how much we had 'lent' the organisation by way of capital equipment and petrol, for cars mostly), we had no 'structure' at all; just two people (with the addition of a third fairly soon after we started), working together, and, when we got off the dole, paying a self-employed stamp.

We thought that, as we were earning so little money from our perform-ances and were living, with our families, just around the breadline, that there would be no tax problems for the foreseeable future. We did get a capital grant from the Arts Council after about a year, which we used to buy a minibus, but were told that these kinds of grants were not subject to tax.

There turned out to be a series of essential problems associated with this kind of informal organisation - too many to deal with here in detail. But the two principal ones, and those which are likely to affect any rural co-operative in much the same way, are these:

1. As the personnel of the group changed over the first two to three years - with some people joining, staying for a few months and then leaving - we found that, though we had refused to define our organisation, we were, in legal terms, a partnership. This meant that, at the end of each financial year, our accounts were presented in a way that defined our income and expenditure in terms of profit and loss; which meant, in turn that, strictly speaking, we were sometimes liable to pay back into the partnership money which had been paid out to us in the form of a weekly wage (if you are a partnership, there is no legal concept of a 'wage' even though this is. the way in which you are most likely to distribute your 'profits' amongst yourselves). This problem was most acute for anyone who had worked with the group for a short time; they appeared in the accounts by name, and were liable in terms of their share of the 'profits' - often perhaps a year after leaving. In one notorious case, the-husband of a woman who worked-with the group - not himself connected with it in any way - found that her share of the profits was attributed to him by the Inland Revenue. As far as we could discover, with the aid of our accountants (who had a lot of experience dealing with partnerships of various kinds), there is no way round this problem in a Partnership.

2. Like many groups in our field - and again this applies to rural resettlement - there were certain advantages in becoming a charity (in our case, relating particularly to regulations concerning grant-aid from the Regional Arts Association). We drew up an elaborate application to the Charity Commissioners; answered a series of searching questions on our aims and objectives - mostly concerned with the issue of whether or not our work was 'charitable' and we were finally turned down, mainly on the grounds that, as a partnership, we were the ones who were deriving financial benefit (our £25 per week' which was what we paid ourselves in good times; we went without if things were not so good); we could therefore not be recognised as having charitable purposes. Not surprisingly, in view of these problems, it-was decided to dissolve the partnership after about four years, and to re-constitute the group as a non-profit-making co-operative, registered under the Friendly Societies Act. Other problems then arose that we had been trying to avoid; principally the liability for Employers' National Insurance contributions. However, we had found that, attractive though the partnership idea seemed to be in principle, the practical and legal difficulties for a group trying to live an a subsistence income are just too great. So, my advice to any group contemplating a formal legal structure is:
(a) avoid defining yourselves as a partnership in the first place.
(b) decide which of the available alternative structures best suits your needs, and establish it as soon as possible. If you don't, in legal terms you will be regarded as a partnership anyway.