The structure of your business has a big impact

There are many aspects to consider when deciding on the type of structure that your business will have, and will both impact upon and be determined by the way your business works, as well the tax implications of your business.

The first consideration is the business vehicle that will best suit your business, e.g. a company, limited liability partnership (LLP) or limited partnership can limit your liability to the debts of the business, but have higher reporting requirements and may result in different taxation. An unlimited partnership or sole trade may be more suitable. Alternatively, separating your business into a mix of the above may be beneficial, but can significantly change the complexity of the taxation facing the business.

The detailed structure of the business will then depend on the particular needs of the business, for example:

  • A property development business will generally form a new subsidiary company for each development project as this will protect the rest of the business from any losses or liabilities from each project, and can allow simpler access to the return on outside investment in individual projects.
  • Where two separate development companies work together on a single project, an LLP may be used as the vehicle for that project, rather than a co-owned company.
  • A charity will create subsidiaries to undertake any trading activities, as a charity will be exempt from tax on any profits donated by the subsidiary, but may not be exempt if it undertook the trade itself.
  • A business group may wish to centralise its administration functions by holding these in a separate company, leaving the trades in other group companies.
  • Separate business elements may be required where investors only wish to invest in part of a business, or where the owner intends to sell part of a business in future.

By creating the initial business structure with a view to the future needs of the business and its owners, the tax arising on major future transactions can often be reduced. Tax Innovations can help you to find the perfect structure for your needs, and those of your business.

If you would like more information regarding the structure of your business, please contact Tax Innovations on 01962 856 990 or customerservice@taxinnovations.com.

For an initial consultation please call us on 01962 856 990 or visit our contact page.