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.
- VAT on new builds 60 1
- Bank Interest Held by Solicitor During Divorce 63 1
- Cost of demolition of a shed - revenue or capital? 616 14
- Are accountants facing a doomsday scenario? 1,734 26
- Missing tax return 72 2
- Are you going to Tick and Bash on 21 May? 889 24
- CG on Spanish property disposal 261 8
- SSAS Pension scheme 134 2
- Quick Income tax calculation question! 526 18
- Physiotherapy 213 3
- Inflation and fees 1,171 20
- Capital allowances not claimed 127 3
- Changing shareholding ratio 258 8
- CGT help please 118 1
- How much would you charge for an interim audit? 329 7
- Cashflow forecasting software 101 2
- What happens when a customer with PPD pays late? 158 2
- Becoming a subcontractor to Accountancy Practices 286 1
- Community Interest Company 135 3
- Redundancy Pay 421 5