Two designated members with their own sole trader businesses (HR taxpayers) want to sell assets to the LLP. LLP does not make a profit or loss.
The assets were written off in their sole trades a while back and only have a small market value. What would be the best way to do this?
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Selling or introducing?
The LLP cannot make a profit or loss in this situation. It is not disposing of anything. Given this is your first question here this leaves me uncertain that you have the knowledge necessary to deal with LLPs properly. You may be better off seeking face to face advice.
Notwithstanding that, there are two ways of getting the assets in.
Selling as private individuals to the LLP. Connected person so market value. Business asset so balancing charge (though small if market value is small)
Or they could introduce as partners. If you have the LLP paperwork so that they retain the right to capital gains if the LLP sells the asset, you can avoid triggering a disposal at all.
Thank you, I appreciate your help.
I was thinking it might be the first option probably but wanted to make sure that I wasn't missing anything. I will also check the LLP agreement.
I have a lot of experience in practice but like a lot of accountants on here not much with LLPs
Nothing personal
Just to be clear, I wasn't saying you had no experience. I was just saying that, these being your first posts here, I had nothing to gauge your knowledge. With the mention of profits for the LLP in the opening post, erring on the side of suggesting you seek help seemed prudent.
As you say, LLPs are unfamiliar to most in practice. To expand on the introduction route, if rights to capital gains are retained, the introducing partner still owns the asset for CGT purposes. This is just now through the medium of the LLP, but no disposal and hence no tax on disposal. If the right to capital gains is split then they will have effectively made a part disposal to their fellow partners instead.
LLP
Don't worry - no offence taken! Unfortunately I do think there are a lot of accountants including me who lack knowledge about LLPs so having access to your expertise on a forum like this one is fantastic. Thank you for taking the time to reply.