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Member of LLP with 0% interests

Hi,

in order to incorporate a UK LLP the rules require 2 members.

Is it correct in your opinion to incorporate a UK LLP with a corporate member with 100% of interests in the LLP and a second corporate member with a 0% of interests ? Both of the corporate members are companies registered outside the UK.

Thank you

Marco

 

 

 

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08th Nov 2018 17:13

marc_london wrote:

Is it correct in your opinion to incorporate a UK LLP with a corporate member with 100% of interests in the LLP and a second corporate member with a 0% of interests ?

It would seem perverse. Why 0% rather than 0.0001%? (Assuming that would be allowed.)

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to Accountant A
08th Nov 2018 17:59

Accountant A wrote:

It would seem perverse. Why 0% rather than 0.0001%? (Assuming that would be allowed.)

Why?

I accept that there appears to be stupidity afoot, but I don't find having a member without a share in the capital or profits perverse.

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to Portia Nina Levin
09th Nov 2018 01:27

Portia Nina Levin wrote:

Accountant A wrote:

It would seem perverse. Why 0% rather than 0.0001%? (Assuming that would be allowed.)

Why?

I accept that there appears to be stupidity afoot, but I don't find having a member without a share in the capital or profits perverse.

Guilty. My knowledge of LLPs is less than useless (as illustrated). Think I was reading something into the OP that wasn't there.

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to Accountant A
09th Nov 2018 07:03

Nevertheless, a natural reading of s2 is that both members are in it for profit.

It's not really a tax or accounts question, of course. And this is technically the wrong forum for the question. So what is perverse is that I therefore think that Justin's contribution here might actually be useful.

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to Tax Dragon
09th Nov 2018 10:06

You should avoid the argument and have a small 0.1% interest (that does not have unrealistic hurdles). If a GP had 2 partners and one was the nominee for the other then it wouldn't be a proper GP of course and you want to avoid that sort of analogous potential argument.

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to Justin Bryant
09th Nov 2018 10:27

Why are you trying to make an entity that is legally a corporate body analagous with a relationship that isn't.

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to Portia Nina Levin
09th Nov 2018 11:07

Because s2 LLPA reads like s1 PA?

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to Tax Dragon
09th Nov 2018 11:30

Except that s 2 only applies on incorporation, whereas s 1 refers to an ongoing relationship, oh and that they don't.

Partnership is the relation which SUBSISTS between two or more persons carrying on a buiness IN COMMON with a view of profit.

v

To incorporate an LLP there need to be at least two subscriber members who:
a) ARE ASSOCIATED
b) FOR THE PURPOSE OF CARRYING ON A BUSINESS
c) with a view of profit (ie the business making profits).

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to Tax Dragon
09th Nov 2018 10:33

Tax Dragon wrote:

Nevertheless, a natural reading of s2 is that both members are in it for profit.

Really? You don't think that s 2 remains sufficiently wide for one of the associated persons to be, for example, a salaried member?

And Justin's contributions are never useful, because even if he sounds like he knows what he's talking about, there's always a good chance that he doesn't.

The layout of this site is complete 5h1t.=

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to Portia Nina Levin
09th Nov 2018 10:35

Portia Nina Levin wrote:

You don't think that s 2 remains sufficiently wide for one of the associated persons to be, for example, a salaried member?

You do think that's what the OP meant?

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to Tax Dragon
09th Nov 2018 10:46

No. But s 2 only says that they are associated for the purpose of carrying on a business. There are more ways for two persons to be associated for the purposes of carrying on a business than just sharing profits, so it is not a natural reading of s 2 that they should. IMO.

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to Portia Nina Levin
09th Nov 2018 11:00

Whether my reading is (the) correct (one), I do not know. It is not unnatural though to read: "associated for carrying on.. business with a view to profit" as requiring that the view to profit is shared by both (or all) members - and that the profit that any member has a view to making is a profit for that member.

If I have read that last bit into it and it's not natural to do so, then I agree with you.

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to Portia Nina Levin
09th Nov 2018 13:31

I do not know the correct answer and it would take me at least an hour to research it (and even then a judge may not agree with it), and you want to try avoid any argument in the 1st place if you can is my simple & obvious point.

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to Justin Bryant
09th Nov 2018 14:20

I agree. Especially since the penalty of lying isn't the odd £100 - it's (potentially) a fine and prison.

The OP has told us the second member is there just to make up the numbers. Which ain't a great starting point for forming an LLP.

So I agree with Lion. The OP needs (to begin with) legal advice.

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08th Nov 2018 18:11

I'm the beneficiary of both the members, it is for this reason the second member can have also a 0% interests in the LLP. :)

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to marc_london
09th Nov 2018 06:52

Beneficiary?

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09th Nov 2018 11:48

Hi all, thank you for your contribution.
I try to explain me better.

The LLP would be a property investment LLP. I will be the beneficiary (I mean I own the 100% of shares) of both corporate members.

I need a tax transparent vehicle and the LLP suite for me but I'm the only investor in it and as you know a minimum of 2 members are required to form an LLP, then a "dummy" second member without interests has to be added. Having a property in the name of the LLP and with a single corporate beneficiary (the first member) simplify a lot the things for taxes and in case the property will be sold in the future. This is the fondamental reason of this kind of structure.

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to marc_london
09th Nov 2018 11:55

Why are you asking this on an internet forum ? It's far too complex.

For heaven's sake, take some proper professional advice !

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By johnt27
to marc_london
12th Nov 2018 16:39

marc_london wrote:

Hi all, thank you for your contribution.
I try to explain me better.

The LLP would be a property investment LLP. I will be the beneficiary (I mean I own the 100% of shares) of both corporate members.

I need a tax transparent vehicle and the LLP suite for me but I'm the only investor in it and as you know a minimum of 2 members are required to form an LLP, then a "dummy" second member without interests has to be added. Having a property in the name of the LLP and with a single corporate beneficiary (the first member) simplify a lot the things for taxes and in case the property will be sold in the future. This is the fondamental reason of this kind of structure.

Sounds like the company in partnership anti-avoidance measures that have been around for a good few years now would b*gger this up.

Since I'm feeling generous an LP structure (something that's almost as old as the Ark) sounds like a better fit. Plus they're way more fun than a boring LLP.

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to johnt27
13th Nov 2018 10:59

Why would the mixed partnership rules apply when both members are companies? And why's the LP structure a "better fit"?

The OP hasn't even indicated what they think using a UK LLP achieves in these circumstances. Maybe a non-UK structure is a "better fit".

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to johnt27
13th Nov 2018 12:35

As per Portia. Also, if an LLP would fall foul of the rules on mixed partnerships, why wouldn't an LP that had the same partners?

For my further education, does "as old as the Ark" refer to Noah or Indiana Jones? I've just asked the internet and it didn't help.

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to Tax Dragon
13th Nov 2018 12:52

In the grand scheme of time (both an indeterminate BC date), can't Noah's Ark and the Ark of the Covenant be considered to be equally "as old"?

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to Portia Nina Levin
13th Nov 2018 18:12

Noah's Ark is older than the Ark of the Covenant.

Just saying like.

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to lionofludesch
14th Nov 2018 10:32

Nobody really knows that. The estimated dates are all based on the (not unreasonable assumption) that Genesis and Exodus are in chronological order - obviously "in the beginning" has to be the beginning - and do not overlap.

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