LLP or ltd company?

Onwards_and_upwards

We really cannot decide and we now need to do this urgently. Our solicitor tells us there are pros and cons to both and we don't know what to do.

In brief:

2 of us, putting in 50% of finance each and putting same amount of hours/work into the business
Turnover of £450,000 and profit of £120,000 (year 4 onwards)

I like the deed of partnership involved in setting up an LLP (though I guess we can have something similar in a ltd company)

An accountant told us to save on tax etc, we should think about making our OHs shareholders, so we get the tax benefits through them also, but I guess this would only apply to ltd company and not LLP?

Can anyone enlighten me onto which might be best??

Onwards_and_upwards

paddyrg, I have taken on board what you said in my other thread. The investor is not interested in the slightest in being involved in the business - he simply wants to lease us premises as part of a bigger development. And I noted what you said about ltd company over a partnership, but thought an LLP would be better?

paddyrg

Tax-wise the partnership may be more efficient or at least give you options if you want one person to take the loss and the other the profit. However, in my industry which is known for sharp accounting practice, HMRC pretty much go through all partnerships with a fine tooth comb as they're at the heart of most abounding manoeuvres.

Personally I like the clarity of position of a limited company (but don't hold exactly 50% each though! Stalemate!) and a darn sight easier to sell if you get bored!

Wywth

Onwards_and_upwards wrote: »

paddyrg, I have taken on board what you said in my other thread. The investor is not interested in the slightest in being involved in the business - he simply wants to lease us premises as part of a bigger development. And I noted what you said about ltd company over a partnership, but thought an LLP would be better?

That doesn't make any sense.
What investor would invest in something they don't want any involvement in?
If you could provide details of such people, I've a shed load of business opportunities (all almost certain to fail) they could invest in

Or do you mean they don't want an active part in running the business on a day to day basis? That's why shareholders appoint directors, etc

If that's the case, I suggest a limited company out of the two choices. The investor can hold shares proportionate to the investment they make ... and if they have enough then they effectively have the final say on how the business runs (should they see their children's inheritance being frittered away)

And there is an easier exit route later for them

Onwards_and_upwards

Wywth wrote: »

That doesn't make any sense.
What investor would invest in something they don't want any involvement in?
If you could provide details of such people, I've a shed load of business opportunities (all almost certain to fail) they could invest in

Or do you mean they don't want an active part in running the business on a day to day basis? That's why shareholders appoint directors, etc

If that's the case, I suggest a limited company out of the two choices. The investor can hold shares proportionate to the investment they make ... and if they have enough then they effectively have the final say on how the business runs (should they see their children's inheritance being frittered away)

And there is an easier exit route later for them

Perhaps investor is the wrong word then! He is a developer who is renovating part of a building for us to lease (the building/site will be used for other things also). He is investing in us, in terms of taking a risk, renovating a property and leasing it to us. So he isn't personally giving us any money for the business, but we are paying him a substantial lease, though he has a large outlay for the building.

Wywth

Onwards_and_upwards wrote: »

Perhaps investor is the wrong word then! He is a developer who is renovating part of a building for us to lease (the building/site will be used for other things also). He is investing in us, in terms of taking a risk, renovating a property and leasing it to us. So he isn't personally giving us any money for the business, but we are paying him a substantial lease, though he has a large outlay for the building.

So what has all this got to do with you setting up a company or LLP? :huh:

Presumably he has agreed to lease to you, not some newly formed third party with a resultant lack of credit history.

Wywth

And in the OP you said:

"2 of us, putting in 50% of finance each and putting same amount of hours/work into the business"

Onwards_and_upwards wrote: »

We really cannot decide and we now need to do this urgently. Our solicitor tells us there are pros and cons to both and we don't know what to do.

In brief:

2 of us, putting in 50% of finance each and putting same amount of hours/work into the business
Turnover of £450,000 and profit of £120,000 (year 4 onwards)

I like the deed of partnership involved in setting up an LLP (though I guess we can have something similar in a ltd company)

An accountant told us to save on tax etc, we should think about making our OHs shareholders, so we get the tax benefits through them also, but I guess this would only apply to ltd company and not LLP?

Can anyone enlighten me onto which might be best??

:huh: :huh: :huh:

Onwards_and_upwards

Wywth wrote: »

So what has all this got to do with you setting up a company or LLP? :huh:

Presumably he has agreed to lease to you, not some newly formed third party with a resultant lack of credit history.

He has nothing to do with it! I don't mention him in my original post! I mentioned him in reply to a previous post to paddyrg as he was talking about offering an investor shares!

We need to set up our company urgently as we have to have done it prior to opening our business banking account, which we need to do now as we have payments to make.

Wywth

Ah! Reading your other recent thread on this board on the same subject, it appears there are two of you wishing to go into business and you will lease a property from someone
https://forums.moneysavingexpert.com/discussion/4703791

See how confusing things can get by starting two different threads on the same topic? Could I suggest you ask the BG to merge your two threads into one to avoid duplication and/or further confusion?

As the 'partner' who will work with you does not seem to be interested in forming an LLP (according to the OP in that other thread), I think you already have the answer to your query.

Edit: Oh no, that's not right either because in post #5 on that thread you said:

Onwards_and_upwards wrote: »

Thank you everyone, we are definitely setting up as a limited company. The way he is investing is by building us a private nursery and then leasing it to us. We hadn't thought about offering him shares in addition to the lease, he should begin making profit on us in less than 5 years. There is definitely at least one other party interested in owning a private nursery in our location, so we really want him to feel confident in us, and although we have the experience, money, local knowledge etc, if he has concerns in our long-term business partnership then that is a concern to us!

Would 3 times the annual turnover or annual profit be a good benchmark for buying one another out?

More :huh: all round from me, I'm sorry.

Onwards_and_upwards

Lol Wywth, I was just thinking the exact same! New to this forum, but on another forum I frequent, the rule is start a new thread if you have a new question!

And I have confused things even more as it is the 'investor' who was concerned about the partnership between my partner and I, incase he gets left with premises he cannot lease if our business fails. My business partner is edging towards LLP whereas I was of the mindset that a ltd company was better!

Anyway, sorry for the confusion!

Onwards_and_upwards

Edit: Oh no, that's not right either because in post #5 on that thread you said:



More :huh: all round from me, I'm sorry.[/QUOTE]

I thought we had sorted to be a ltd company, but my business partner wants to explore an LLP again!