Ilyas Patel Accountants in Preston
Ilyas Patel Accountants in Preston
Do you know the tax benefits of setting up a Family Investment Company LLP? Find out how it can benefit your business.
Family Investment Company vs LLP Tax
If you’re seeking to safeguard your wealth, grow your business, and pass it on to your family with lower taxes while maintaining control, a Family Investment Company (FIC) is a flexible structure that could be of use.
Some of the benefits of setting up an FIC are avoiding Inheritance Tax on your capital, separating business operations from investments, and supporting investment goals.
Additionally, FICs enable investing in various asset classes while retaining Business Property Relief (BPR) and safeguarding your assets outside your estate.
If you own a profitable business, it’s essential to protect your wealth and keep growing it while taking into account Inheritance Tax implications. This is where FICs come in.
On the other hand, an LLP (Limited Liability Partnership) combines the flexibility of a partnership with the limited liability of a company.
A Family Investment Company LLP is a combination of an FIC and an LLP, providing limited liability protection to its members and the flexibility of a partnership.
As a new concept, this structure is becoming increasingly popular among families for managing their assets and reducing tax liabilities.
In summary, Family Investment Companies and Family Investment Company LLPs are vehicles used to transfer wealth between generations while managing family assets and reducing tax liabilities.
As experts in advising families, we understand the significance of maintaining continuity for family wealth, particularly for those who have built their fortunes from scratch.
You want your investments and property portfolio to be managed efficiently and benefit all family members, including future generations.
Holding assets in a single entity, such as an LLP, provides administrative convenience and eliminates the need for frequent transfers of ownership. LLPs also offer control and management opportunities, with defined rules outlined in the LLP agreement.
This aspect is especially crucial for first-generation wealthy individuals who wish to keep control of their wealth while alive.
While family investment limited companies may offer similar benefits, owning wealth through a limited company has complex and costly tax implications, making LLPs the superior choice.
LLPs provide substantial tax advantages that are easily accessible, making them the superior investment vehicle when compared to companies.
In the following sections, we’ll delve deeper into the tax benefits of LLPs.
To summarise, here are the key benefits of a Family Investment LLP:
Wealth management: It provides a structure to hold investments, such as shares, property, or other assets, and efficiently manage them.
Succession planning: It facilitates wealth transfer between generations, enabling family members to retain control while passing on ownership to the next generation by transferring assets to the LLP.
Tax efficiency: A Family Investment LLP provides Inheritance Tax relief and capital gains tax benefits, offering flexibility in tax planning and effective management of tax liabilities.
Limited Liability: Family members can limit their personal liability for any business debts or legal issues, ensuring peace of mind and protecting family wealth and assets.
Setting up a Family Investment LLP could help you manage your wealth and assets while offering tax efficiency and limited liability protection. The LLP structure is an ideal choice for families looking to retain control and manage their wealth while passing it on to future generations.
Setting up a Family Investment LLP provides several benefits, including potential reductions in Inheritance Tax (IHT), Capital Gains Tax (CGT), and Income Tax liabilities. Family Investment LLPs can also be eligible for Business Property Relief (BPR), which provides relief from IHT on certain types of business assets.
By holding assets within the LLP structure, they are not considered part of the estate for IHT purposes, enabling family members to transfer assets between generations without triggering IHT charges. When assets, such as property, are transferred to the LLP, they can be done so without incurring CGT. Additionally, profits earned by the LLP can be distributed to members in a tax-efficient way to reduce overall tax liability.
Family Investment LLPs can be used to distribute the ownership of assets, such as a property, among family members, allowing any profits made from the sale of the asset to be split equally among family members, reducing the amount of tax owed.
Before making any decisions regarding your business, it’s important to speak with a Tax Expert to ensure that your tax strategies are efficient and compliant with HMRC rules.
Contact us here and we’ll get back to you!