Corporate member of LLP

Corporate member of LLP

Didn't find your answer?

I have an LLP law firm client (2 partners) who wish to promote a member of staff. The employee at present is on a low base salary and then has various tiers of bonus based upon the level of fees that he bills. For example if he bills less than £100k then he just gets his £20k salary, if he bills over £100k then he gets 20%, anything over £200k then its 25%, anything over £500k then it's 40% etc etc. He manages his own workload, works the hours that he wants, sometimes works from home but generally works from the firms office, he's been an employee for a number of years.

The proposal is that he forms a Ltd company and becomes a Corporate member of the LLP (non-designated). The firm wish for his current pay structure to continue, it works well for everyone. The existing partners don't want to give away any significant decision-making powers or 'equity' as it were.

I'm aware of the changes to LLP taxation and disguised remuneration of LLP members. He won't be putting any capital into the business, and he won't have any power or influence over the business, so that's 2 of the 3 criteria failed. Criteria 3 however relates to the basis of remuneration, his remuneration will be entirely dependent on his departments performance, there is virtually no fixed element at all. Is this sufficient to meet criteria 3? Or does his remuneration have to be linked to the global profits of the LLP, rather than just 1 department? His corporate member profit share would vary each year based upon his performance, he would draw down funds throughout the year as he bills work/generates profits.

I probably need to give IR35 some thought too, but that's a different matter.

As background information the employee earns in excess of £200k so there are ER's NI savings to the firm of at least £50k as well as personal tax/NI savings to the individual of £20k.

Any comments would be appreciated.

Replies (1)

Please login or register to join the discussion.

Portia profile image
By Portia Nina Levin
25th Apr 2015 12:08

(No subject)

Thanks (0)