Client is Sole Shareholder in Limited Company and Controlling Partner in LLP.
To satisfy conditions of admission to an external body in connection with his business he needs to demonstrate Full connection of the 2 businesses.
As the limited company is only trading on a very small scale and the LLP is his main business he wishes to sell all of his shares (100 x £1 Ordinary) to the LLP and make the limited Co "A fully owned subsidiary of LLP"
Is this feasible? What other implications could be considered?
Richard Clarke
Replies (5)
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Partnership to LLP
Can a partnership transfer the trade to and LLP?
Is this basically the same procedure as sole trader to Ltd co or are there any major differences?
From a corporate point of view, this is possible-but is there a
The starting point is that an LLP is a body corporate, so it can have a subsidiary. In practice the accounting and audit rules which apply for a company are extended to an LLP , so consolidated accounts of the LLP will be required to be filed at Companies House.
Where the special aspects of the LLP come in are for tax. In practical terms an LLP is tax transparent, so the transfer of shares from the individual to the LLP is a non event for CGT , subject to the comment below. The LLP will continue to file a partnership return-and if no dividends are paid the LLP will have no income other than its existing profits.
There is one small CGT issue. The client is described as the "controlling" partner[?member] of the LLP. That implies there may be another or others. If those others are anyone other than his spouse, the transfer of the shares in the company to the LLP becomes a part disposal of those shares to the other members , resulting in a potential charge to CGT on that part disposal.
There is no "share for share" or equivalent relief.From the way the question is posed this may not be a material figure.
For IHT the transfer to the LLP is unlikely to be treated as a disposition giving rise to a transfer of value to the other members, as the transaction is not intended to confer gratuitous benefit. The individual is therafter treated as owning his proportion of the LLP's underlying assets-i.e.the shares in the company and the business of the LLP itself.