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.
- accounts & tax software for small accountancy firms 773 27
- New Practice 106 8
- Goods Purchased for Rental 519 29
- HMRC 2009/10 Return 227 3
- Data Protection and emailing documents 1,123 16
- UK Tax Treatment of Finance Lease Payments 86 1
- Can I zero rate the VAT? 67 1
- Taxfiler V's BTC 614 23
- Why do HMRC have a different FPS liability to the amount I sent? 1,985 25
- Does anyone have a formula to compare employment to self-employment rates? 426 8
- Valuation of business 307 5
- CGT implications for gift of shares to connected person 158 7
- Dividend Payments 413 10
- I.d for vat registration 177 7
- Capital allowances anti-avoidance 146 4
- builder's 'cost only' job 190 1
- Myfirmsapp 633 13
- Filing past due corporation tax returns 287 1
- Completing Self-Assessment for a Director of Owner Managed Business 184 3
- CIS Deductions 149 2
- Nil Rate Band Trust - index linked debt by way of charge over property 1,010
- International interest certificate 588
- Have we escaped Gift with Reservation of Benfit & Pre-owned asset charges? - Gift after benefit 514
- NOVA 470
- Bonus Bonds 355
- Insolvency and whistle blowing 335
- Transfer of funds into recently set up company 257
- Payment for Promotional Samples 229
- TPR imposes first penalty notice fines 222
- Quickbooks 2015 152