Partners incorporating individually
The members of an LLP are thinking of incorporating fully, but not as one limited company. Instead, each will transfer his share of the business to his own personal company, leaving a partnership comprising entirely of corporate partners - a 'CT partnership'.
They will not claim any deferral in respect of the disposal of their shares of the business and will pay the 10% CGT, thereby generating a loan account. That's the idea, anyway.
On the face of it, the figures look pretty good for a business at this level of profit, as each corporate partner draws a modest dividend to use up the basic rate band and draws the rest of his income needs as a loan repayment. Even after the loan accounts are gone, there is still a modest tax saving to be had year on year.
The use of corporate patners creates a number of (hopefully!) unconnected companies, all of which are small for corporation tax purposes - incorporation of the whole business would create a company liable for the full rate of CT.
I am aware that this structure will reduce flexibility as far as a future sale of the business to a third party is concerned. Other than that, is anyone aware of any restrictions or pitfalls to the proposed structure?
Many thanks in advance for any comments.
- Halloween - do you celebrate it? 825 25
- Accounting for VAT not yet paid in year end 369 10
- Double tax agreement - do you show income on UK return even if the DTA says it is taxed in the other country? 109 1
- Audit procedures on a dormant company 238 3
- More HMRC on gov.uk 384 8
- Problem ex client...again.. 1,212 12
- CONVERSAION OF DIRECTOR LOAN INTO EQUITY 113 3
- Cash withdrawn and not accounted for 363 5
- Clearing payments on account/ Sage 50 199 7
- Completing RP1 form in re Redundancy /Insolvency 244 8
- VAT in Sage 172 3
- Recommendations for payroll/AE software? 483 10
- Expense receipt from previous quarter not included in VAT return 270 4
- Know it alls (who don't) 1,317 23
- Have we escaped Gift with Reservation of Benfit & Pre-owned asset charges? - Gift after benefit 572 1
- Capital allowances anti-avoidance 342 10
- Transition to FRS102 - goodwill 525 14
- Employed clients and expenses 849 16
- Goods Purchased for Rental 637 31
- UK Tax Treatment of Finance Lease Payments 155 3
- NOVA 494
- Bonus Bonds 382
- Insolvency and whistle blowing 362
- Transfer of funds into recently set up company 277
- TPR imposes first penalty notice fines 244
- Friendly Pensions 183
- Box 8 VAT Return - deposit payment 166
- Husband proposes to buy the car as Director unable to acess finance 149
- Finance Lease 144
- Company Car Lease 141