Corporate partner for LLPs

Corporate partner for LLPs

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Hi,

I started an LLP with a former colleague a few years ago

We are considering replacing ourselves as partners with corporate partners(limited companies)/our accountant prepares our tax returns but doesn't have knowledge of this area so I'll need to find a new one but want to do some research beforehand hence the question

We are doing this rather than incorporation as some of our clients would require us to renegotiate contracts if we change the LLP to a Ltd company

1) I can sell my goodwill to the limited company and create a directors loan so no cash changes hand in the first place - the capital gain will be taxed by CGT

Is there any tax to pay when the company repays my loan and can I charge it interest?

2) I understand depreciation of this goodwill is also allowable for tax purposes if it is created post 2002 - is this correct?

3) How do I get my 'drawings' from the LLP to the Ltd company? Are they just drawn out in the same way as now or do I need to use management charges? Would this income cause the Ltd company to need to register for VAT (if over the limit of course)?

4) Can I make my wife a director in the Ltd company aswell (So she can also use up her personal allowance and basic rate band for 'tax free' dividends?) even if she has no day to day involvement with either the Ltd company or the LLP?

5) I have noticed some firms where some partners are individuals and some are companies - what advantage is there in this?

6) I know the LLP then can't claim AIA as all the partners are not individuals - are other CA/tax deductions affected too?

Replies (3)

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By grinandbearit
17th Nov 2012 13:03

2. You should read http://www

2. You should read http://www.hmrc.gov.uk/avoidance/spotlights1.htm ie it matters when the bsuiness starterd- if before before commencement of the regime (1 April 2002) amortisation is not allowed. 

 

4. Yes

 

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Replying to cvsmith:
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By User deleted
19th Nov 2012 13:20

Directors dividend?

grinandbearit wrote:

4. Yes

 

Being a director does not give you an entitlement to dividends

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By George Attazder
19th Nov 2012 14:05

Here goes

1 and 2. Aren't possible.  You can't have the goodwill held by the corporate partners and the rest of the business held by the LLP.  Goodwill is the difference between the value of the business (as a going concern), which is held by the LLP (and not individual partners) and the fair value of the identifiable assets.  There may be other (seperately identifiable) intangibles that can be transferred though, in which case, refer to grinandbearit's response on point 2.

3. The profit share will be recognised as income in the corporate partners accounts (dr debtors, cr income) as it accrues and will be realised in cash (dr bank, cr debtors) as the corporate partner draws it from the LLP.

4. Refer to the above responses. Your wife will need to be a shareholder in your corporate partner.

5. This is just the personal preference of individual partners, rather than tax planning.

6. No, all other P&M allowances work the same way.

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