LLP’s have been with us for some time as a way of structuring a business such that it remains as partnership but achieves many of the benefits of Limited liability offered by Limited Companies.
LLP’s can be considered to be a hybrid of both traditional partnership and limited company and have what may be considered to be unusual tax treatment.
The simplest and most common LLP will be a partnership where all of the members are individuals, typical examples of theses would be professional advisers such as solicitor’s etc. In these cases the individual members are taxed on their share of profits as they arise via their Self Assessment tax returns in just the same way as self employed individuals and members of traditional partnerships.
LLP’s can offer taxation savings when there is a change to introduce a corporate member and there are a number a tax planning strategies that can be implemented to greatly reduce exposure to all taxes. Particular areas where LLP’s may prove useful are new business start ups where there is potential for significant profits in early years with creation of goodwill and also for property investors. In addition to these areas LLP’s may provide a solution where shareholders of Limited companies are wishing to sell their business but purchasers wish to simply acquire the trade and assets rather than an effect a share deal.
We are currently working with a number of our clients in this area and if you are planning to start up a new business or looking to invest in property please do contact me to ensure that you take advice on the most tax efficient structure to achieve your objectives whilst minimising exposure to taxation.