By Max Clarke
London based commercial law firm Mishcon de Reya are advising the nation’s small businesses of the benefits a limited liability partnership can have.
In an article to the Telegraph, the firm said some 90% of small businesses have not restructured their business since inception, and many of these have not considered LLPs as a possibility.
Commenting on news that small businesses could be missing out on a range of financial and motivational benefits by ignoring limited liability partnerships are leading accountants and lawyers from the UK200Group.
Alan Boby, Tax Partner, Ellacotts LLP:
“It is very timely to remind entrepreneur’s that the structure can have a significant effect on the commercial, financial and taxation future of the business. In particular, limited liability partnerships (LLPS) are a very useful weapon in the armoury of the business tax planner.
“Most people know that LLPs can provide limited liability protection and the price one pays for this is having to file some information on public record. However, what is less well-known and understood is that LLPs are ‘transparent’ for tax purposes in stark contrast to limited companies and this can provide distinct advantages in some business structures that carry tax benefits.
“Examples of the use of LLPs, of course, include professional partnerships such as solicitors, accountants and property agents and advisers. However, LLPs can also provide tax advantages for property investors, joint ventures and, most significantly, entrepreneurs who have a series of business investments that they do not necessarily want in the same group.
“I wholeheartedly support the use of the LLP option in the right place even though it has only just reached its 10th birthday!”
Anthony Harris, partner, Critchleys:
“Is the problem a 'lack of knowledge' among entrepreneurs, or among their advisers? Good quality chartered accountants should know all about LLPs and how to use the structure to benefit entrepreneurs. Too many are blinkered into using just Ltd companies as a tax benefit whereas the two can be interlinked for tax.
“Indeed LLPs are just ‘companies’ with the tax position of partnerships, so if partnership tax is not appropriate, then they are not appropriate. A balance is needed.”
David Ingall of JWPCreers:
“LLPs are one of a range of options available to businesses, both large and small. Control of personal liability to third parties is one of the major advantages.
“Like limited companies, which offer similar protection, there is a price to pay in the more formal regulatory regime and the requirement to disclose information to the public. Limited companies additionally offer taxation advantages.
“Yes, both these vehicles for businesses are probably under used but no one should even consider such a change without carefully reviewing all the pros and cons with their accountant.”
Jonathan Russell, partner, ReesRussell:
“The LLP structure is one that may be considered by businesses. The major problem is that many struggle to understand the complexity of the structure both from legal and tax aspects. Therefore it tends to be that small businesses tend to either use a traditional partnership or go for a limited company.
“Those using the LLP tend to be firms which would like to be a limited company but for other reasons cannot. The LLP is a very good structure for service based businesses to consider as an alternative to the limited company but frequently the governing rules just make it simpler for the participants to be a limited company as it is easier to understand.”