Partnerships vs limited companies

[connor454545]

Hi all,

Just wandering what everyone's views are on which is better partnerships or limited companies and tax implications.

My farther is currently a tenanted dairy farm in partnership with my mother, but he is in the process of transferring rains of the business to me. I intend on running things and he would like to get himself another job doing something else (don't know what yet though) but currently would still be a partner and as such get taxed alot?

Soooo if the business where to change into a limited company where all three of us had control (directors) would that mean result in more or less tax to pay. Or would it just be better to remove himself from the partnership and replace with me (but he would loose control, which wouldn't be fair).

Thanks for the help. #Keep this sunshine up!!!

 

[Thick Farmer]

If you transfer the tenancy to a Ltd company then you will not have to worry about succession as the Ltd company will never die!
Also, no risk of losing your own assets if it all goes tits up...

 

[franklin]

Most tenancies will have been amended so as not to allow that. Many landlords stung that way in the past.

Structure the business to have a partnership and a ltd, and move money to where it is more "effective" to be.

 

[B&B Pig Man]

No landlord would ever allow you to transfer the tenancy to a Ltd - if we are talking AHA.
FBT is different and wouldn't involve succession anyway.

Becareful about changing anything to do with your business at the minute - there is the CAP reform golden ticket to consider at this moment in time!

 

[Walterp]

Although farming companies have in the past caused more problems than they solved, I have to say it's another vote for them here - they do not have the problems that p'ships can have if they go wrong.

"A partnership is the worst ship you can sail in..."

[Walterp pauses, muses to himself and mumbles quietly: "Hmmm...would anyone believe me if I described how a partnership going wrong once cost me over half a million Pounds?"]

 

[rusty]

I have both. Cows and milk quota transfered to a ltd company about 9 years ago. Everything else still in partnership. As a rule of thumb don't have assets that may appreciate in value in a ltd company. You pay less tax in a ltd company but have to pay comany car tax and benefit in kind for farmhouse etc so better to keep these in a partnership.

 

[Thick Farmer]

I have also experienced what can go wrong when a partnership goes bad. It is not pretty.

Only cost me £12k, but I was liable for all debts created by the partnership...

 

[flywheel]

you would be better to have a word with your accountant reguargind this as it can cause problems being in a ltd company usually your turnover has to be over 100k but i maybe wrong .some on here will know better than me . ltd company pays tax as does directors

 

[pellow]

I think it depends how profitable the buisness is, if your father wants to stay a partner for a while, you have his tax allowances before you get to 40% tax, so if it's the 2 of you in partnership I guess you need to be making over £60k per year taxable profit before Ltd is worth looking at.

Not sure you get your tax free herd sale on retirement if the cows are in Ltd company?

 

[Elmsted]

Parternership is people with a common goal putting their assets and abilities in to a common pot surely. Depending on the asset and ability the share out is proportional.

A limited liability company was conceived as a mechanism whereby individuals could broaden the funds available for the sucess of the venture and at the sametime limit the exposure of a sc****P to a fixed sum. I have no idea as to the tax implications of the OP. However. From a principals basis either the father hands over now what he has. And the OP gets on with it. Or leave well alone and allow time to take it's course.
Evidence to date shows that decisions based upon mitigating tax liabilites are not always concurent with inter family wishes.

 

[IANTO]

Hi all,

Just wandering what everyone's views are on which is better partnerships or limited companies and tax implications.

My farther is currently a tenanted dairy farm in partnership with my mother, but he is in the process of transferring rains of the business to me. I intend on running things and he would like to get himself another job doing something else (don't know what yet though) but currently would still be a partner and as such get taxed alot?

Soooo if the business where to change into a limited company where all three of us had control (directors) would that mean result in more or less tax to pay. Or would it just be better to remove himself from the partnership and replace with me (but he would loose control, which wouldn't be fair).

Thanks for the help. #Keep this sunshine up!!!

Quite a few things to think about.

1. As has already been said, you need to take advice about the Implications on the "Golden Ticket". It might be possible for you to register a Ltd Co., in which you and your parents are share holders as a Partner to the existing Partnership.

2. Any assets transfered to the Ltd. Co. must either be paid for, or appear as Directors Loans. There may be Capital Transfer Tax Implications, as it is a disposal. It may be possible to obtain Roll Over Relief, but Retirement Relief, if your parents want to get out, (depending on their age) is probably a simpler and safer bet.

3. The Farm is Tenanted. I honestly don't know what the implications of this are. Again you need to take professional advice, about the exact circumstances and Tenancy Agreement.

Without knowing the details, I would suggest that any Tenancy were best kept outside the Limited Co., as this is probably your best bet of taking over the Tenancy in due course.

The benefits of a Ltd Co., are that the shareholdings can be changed (by deed of Gift) over the years, diluting your parents share and increasing your own, and hence mitigating any Inheritance Tax Liability.

You can also pay a Pension to Retired Directors, which comes of Gross Profit. Manipulating Shareholdings you could pay both your mother and father, a Pension below the personal allowance, and also a dividend based on their shareholding, on which under current legislation, there is no more tax to pay.

 

[connor454545]

Thanks for all the info, food for thought. Will have to discuss it with accountant/legal expert see which best fits the business.

 

[Blue.]

Know of a chap who claimed a tenancy,in his ltd company name,he's currently in a court battle to stay on the farm.