How To Use Limited Liability Partnerships To Reduce Tax Limited liability partnerships ('LLP') were introduced in 2001 and offer a cross between a partnership and company structure.
An LLP is simply a partnership, which provides the partners with the benefits of limited liability - thus ring-fencing their personal assets from any potential business creditors.
Although in general law a LLP is regarded as a 'body corporate'and is like a company, for tax purposes a LLP is normally treated as a 'partnership'.
Therefore an LLP will normally be regarded as transparent for tax purposes and each member/partner will be assessed to tax on their share of the LLP's income or gains as if they were members of a 'normal' partnership.
If a LLP carries on a trade each registered partner is taxable on the income they derive from the LLP as trading income.
This is a crucial difference from being a shareholder in a company. A company shareholder is regarded as a separate entity for both legal and tax purposes. An LLP however is a separate legal entity purely in legal terms.
There are a number of changes to the tax treatment of UK LLP's from April 2014. We look at these in detail in this guide.
In this guide we look at:
what an LLP is and how it is taxed? how you can take advantage of this to reduce your UK taxes. what you need to know about LLP's ten reasons why you should trade via a UK LLP how to use a corporate partner to reduce tax how LLP's can be used to reduce corporation tax trading in the UK with a UK company/LLP and how to minimise tax using an LLP to maximise Entrepreneurs Relief and reduce capital gains tax 2014 changes to the tax treatment of LLP's
About The Author
He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice.
He is now a full time tax author and the Editor at www.wealthprotectionreport.co.uk