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.
- Do most of you still use MS Office? 1,223 20
- Lease 55 2
- Thin Client recomendation 172 3
- Mileage allowance payment via payroll 166 5
- Payroll error by client on Moneysoft 118 4
- Digita Hosted Software 373 2
- VAT Office Grimsby 101 2
- Suggested tips to become a better accountant? 359 8
- Stock Valuation when a partner dies 87 2
- format cell to exclude decimals 281 15
- Inheritance Tax and the 7 Year rule for property as a gift 113 2
- ethical- to continue to act or not? 1,260 15
- Homing sandwiches 830 19
- Flat rate VAT- other income calculation 240 2
- SUSPECTED OR INVALID BENEFIT FRAUD 217 2
- Client needs a UK tax residency certificate for Spanish tax authorities 97 2
- IT advisory questions? 409 11
- Direct debit entry query 155 4
- Moneysoft and People's Pension 802 12
- Can you help me spot errors? 231 2
- Auto enrolment excuses 1,295
- Feedback on accounts production software for IFRS 847
- Add T&Cs to Sales Order in Sage 537
- Credit where credit's due....... 331
- Buying goods in US and selling them to company in US 251
- TheTax Donut 216
- Double taxation relief - same income, different individual 179
- Semi retired FCA or equivalent 165
- Director's business mileage 142
- Sole trader CPD 137