Holding company formation

dmeagor

Hi

In the past I've used cheap company formation services to create ltd companies. Does anyone know how to go about creating a non trading holding company and then transfer the existing company into it?

Is it just a case of creating a new ltd company and then changing the shareholders of the old one to the new entity at companies house or does something special need to be done when creating the holding company. Different articles or something?

It's more a speed thing than anything, I'm in a hurry and my accountant takes forever.

bni

There will potentially be significant tax (like Capital Gains tax, Entrepreneurs relief, etc.) implications now and in the future of such a transfer depending on the company and its value.

A holding company is an informal term for a company set up to own another company or companies. Are you sure that you need a holding company? What is the rush?

dmeagor

bni wrote: »

There will potentially be significant tax (like Capital Gains tax, Entrepreneurs relief, etc.) implications now and in the future of such a transfer depending on the company and its value.

A holding company is an informal term for a company set up to own another company or companies. Are you sure that you need a holding company? What is the rush?

I need to open an LLC in the US. Since we do not have an equivalent in this country it would be taxes as personal income and therefore I would be at a loss regarding the taxation of expenses etc. The group structure apparently prevents this.

We need to sign a contract in the US in about a month but we currently have no US entity so I'm rushing to get one setup.

bni

An LLC is form of incorporated partnership, but you could still own it using your current limited company? What would the benefit be of introducing a new parent company into the mix?

The interaction between US and UK tax law is pretty complicated when it comes to flow-through (like a sole trader, partnership or an US LLC) and hybrid (where treated differently under respective tax codes) entities and there are a lot of anti-avoidance rules in place in the US tax system to prevent off-shoring of profits. Have you spoken to someone with expert knowledge of both the US and UK tax?

dmeagor

I spoke with my accountant yesterday about this. They have several clients with US properties and had the ability to file US federal and state taxes for me. I don't know if they are expert but they seemed to have a decent knowledge of the US tax system.

Regarding the off-shoring of profits why would this be an issue if the LLC is a tax pass through and doesn't have state taxes applied.

A group company properly separates the liability. If my existing company owned the US one then it would only be one-way protection.

bni

Is the UK holding company only going to own the US LLC? Would there be any advantage of your current limited company being owned by the same holding company?

You could set up the UK holding company simply to incorporate the US LLC and deal with the possibly transfer of ownership of your current company to the holding company after taking advice from your accountants.

The comment about anti-avoidance in the US tax code was simply to point out that they have much more onerous requirements on reporting legal structures, off-shore ownership but if your accountants are familiar with all of that then that's all good.

dmeagor

bni wrote: »

Is the UK holding company only going to own the US LLC? Would there be any advantage of your current limited company being owned by the same holding company?

You could set up the UK holding company simply to incorporate the US LLC and deal with the possibly transfer of ownership of your current company to the holding company after taking advice from your accountants.

The uk holding company would own the existing UK and new US company. That was my plan anyway.

A few years ago I opened another company without the group structure and that landed me with an £18,000 tax bill due to my small business tax allowance/band being split between a profitable company and an unprofitable one (resulting in my accountant being sacked.)

bni

I'm not saying that your plan would not ultimately be the best one, just suggesting that it might have implications (like your previous structure of two separate companies) and would suggest not rush into any changes of your without first checking with your accountant (that I assume you trust).