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LLPs Boost Partners' Incomes
01 Jul 2006
Until recently, UK businesses had only two basic choices of structure. They could be limited companies or they could be partnerships. A new hybrid structure, the Limited Liability Partnership (LLP) offers many benefits for businesses owned by their proprietors, as is often the case in the maritime community.
Using London's ship broking community as an example, Philip Parr, shipping tax partner at shipping and insurance advisers Moore Stephens LLP says, 'The majority of shipbrokers are owned by their employees. Most of them have opted to become Limited Companies in order to limit the personal liability of the owners and because limited companies were perceived to have more market substance than mere partnerships. But in practice, most of them are owned by their directors and all profits are distributed to the directors.
'If such a company now converts to the new form of partnership, the LLP, the business can still limit its liability and the actions of one partner cannot impose a liability on the whole partnership.
'However, the new structure, whilst treated as a company by law, is taxed as a partnership.
And that offers significant savings to the members. In a partnership, Class 1 national insurance payments for both employee and company are replaced by the far less onerous Class 2 and Class 4 NI contributions on partners' incomes. This reduction in NI charges can boost partner incomes by 12%. And the public perception of the LLP is the same as that of a limited company, so there is no reason not to switch'.
Moore Stephens has also warned that the UK's position at the heart of the world insurance market may be under threat from a combination of regulation and technology.
