Company in an LLP

We act for a professional services business which trades as a limited liability partnership (LLP).

There are two members of the LLP one of whom has an annual profit share of around £300 000. He is anxious to avoid 50% income tax if possible.

For professional and commercial reasons incorporation is not possible. The member in question is unmarried but does have a long-term partner.

After some brainstorming a thought that has been put forward is for the member and his partner to form a limited company owned 50:50 by each of them.

The limited company would then acquire at an independently valued figure (say) 80% of the member’s fractional share of the LLP.

There is no doubt in this case that the associated goodwill is free goodwill. Consideration for the acquisition by the company would be left outstanding on loan account.

Clearly such...