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A long-established partnership of five persons is considering the retirement of the present individual partners who would be replaced by five limited companies. Is this acceptable tax planning or are their pitfalls?
We realise this is a scenario that comes up quite frequently but a refreshing of the potential issues would be greatly appreciated.
A long-established and profitable trading partnership has five otherwise unconnected partners. They have been advised to each set up a limited company which will be introduced as a partner into the partnership.
The five individuals will thereafter retire from the partnership each withdrawing their capital from the partnership but nothing else.
The partnership will therefore continue as before but with just the five companies as the partners.
Each former partner will probably introduce funds into their respective company which will be lent down to the partnership to replace the partnership’s working capital.
Other than that the companies will do nothing more than take the former partners’ profit shares which it is planned will be withdrawn tax efficiently particularly because...
Please reach out to customer services at +44 (0) 330 161 1234 or 'customer.services@lexisnexis.co.uk' for further assistance.
