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.
- Accountancy practices - are you closed over Christmas or do you let your staff take it off? 924 29
- You know its over 292 4
- HMRC BACK AND FORTH FIGHT ON BTL PROPERTY ALLOWANCES 478 9
- How do you find shareholders of a Cyprus Company ? 201 13
- Valuing my fast-growing internet business for transfer of goodwill on incorporation 151 2
- HMRC won't let me set up online DD for PAYE 139 2
- What is the amount of dividends received as a shareholder that requires registration for self assessment? 203 3
- Cocaine anyone? 489 8
- Late Registration for VAT 475 13
- EIS/SEIS 134 1
- Amortisation of Goodwill 267 1
- TaxCalc Accounts production 408 5
- Depression - HMRC penalties case won because of this illness. 411 12
- Solicitors now, Accountants next 699 10
- How come if you claim benefits you are not entitled to you either have to pay a 50% penalty or are sent to court and either fined or sent to prison (sometimes suspended) and end up with a criminal record. 549 10
- ACCA - still making me laugh 578 4
- Personal pension 396 9
- Legal Aid Agency claims and VAT 219 1
- How much of your work is admin? 1,209 11
- Petrol expenses for self-employed 159 3
- Hive up 487
- Accounting referance change & deficient accounts. 451
- corporate hierarchy 432
- Advice - 269
- Anyone had HMRC refusing to act on EPS database glitch? 222
- WWOOFers 215
- Co. limited by Guarantee now closed 204
- Art Gallery - Splitting a property between business and personal use 192
- Tax liabilities in USA for warehoused products 172
- Mutual Trading - Exempt CT Income - Do I need clearance? 171