What partner to appoint for UK LLP?

[Alenka]

I’m going to form UK LLP, for that I need second partner - corporate entity in tax-free jurisdiction that will be controlled by me.

What is the best jurisdiction for the purpose?

My plans:
1. To give that fully controlled entity 0.1% of the LLP. So that the entity will be needed just in order to form LLP because I need partner to form it.
2. To avoid difficulties with EMIs as much as possible: the country where I incorporate the entity should not be blacked listed.

Any experience what country works best in such case?

I considered Cayman / BVI for such purpose, but I heard with such entities in structure will be impossible to open EMI account afterwards.

 

[Don]

Estonia LLP - tax free until distributions, no reporting, cheap setup, bank friendly

 

[Sols]

Avoid offshore like BVI and Caymans. It increases the over all risk profile of your LLP.

Stick to something in EU, UK, or US.

 

[Jbb1]

Estonia LLP - tax free until distributions, no reporting, cheap setup, bank friendly

I see a lot of comments from you about Estonia, do you know any good service provider for Estonian companies?

 

[JohnLocke]

I see a lot of comments from you about Estonia, do you know any good service provider for Estonian companies?

I would recommend to check members signature below each post

 

[Don]

I see a lot of comments from you about Estonia, do you know any good service provider for Estonian companies?

Feel free to PM.
Good is subjective - depends on what you expect.
That being said, Estonia professional services are rather unregulated so I would do some due diligence on the provider/person.

 

[Alenka]

Avoid offshore like BVI and Caymans. It increases the over all risk profile of your LLP.

Stick to something in EU, UK, or US.

US LLC won’t be liable for taxes in the US if make it a partner of the LLP?

And if it’s technically possible to use the LLC just to form the LLP, but in order not to make it taxable, to give the US entity 0% of the control over the LLP?

 

[Don]

US LLC won’t be liable for taxes in the US if make it a partner of the LLP?

And if it’s technically possible to use the LLC just to form the LLP, but in order not to make it taxable, to give the US entity 0% of the control over the LLP?

0% control - this is the definition of a limited partner in an LP (limited partnership). You can appoint anyone to fill this role.
Regarding profit distribution, you should outline the relevant terms in a partnership agreement.

 

[Sols]

US LLC won’t be liable for taxes in the US if make it a partner of the LLP?

LLCs are ordinarily not taxable entities. The profits become personal income for the members (same as an LLP).

And if it’s technically possible to use the LLC just to form the LLP, but in order not to make it taxable, to give the US entity 0% of the control over the LLP?

You cannot have a zero interest member in a LLP.

 

[Alenka]

LLCs are ordinarily not taxable entities. The profits become personal income for the members (same as an LLP).


You cannot have a zero interest member in a LLP.

Don said it is possible to have 0% partner in LP, is it correct?

And for LLP: can it be 0.1%? Or the minimum is 1%?

 

[Jbb1]

If a US LLC is a partner of a UK LLP you probably will run into issues to open bank accounts.

 

[Alenka]

If a US LLC is a partner of a UK LLP you probably will run into issues to open bank accounts.

I also suppose so. Can you tell why?

 

[Sols]

Don said it is possible to have 0% partner in LP, is it correct?

You can have partners that have no control, but AFAIK you cannot have partners that have no interest.

And for LLP: can it be 0.1%? Or the minimum is 1%?

There has to be something. The lower you make it, the sketchier your LLP will look to EMIs and PSPs. Your LLP looks weird and strange.

 

[Don]

You can have partners that have no control, but AFAIK you cannot have partners that have no interest.

I believe you can structure it in such a way that the partners are eligible for their interest only if each has paid in an agreed amount of capital. This way you can indicate a higher, less sketchy percentage, but actually pay out 0 to one of the partners.
I recommend to double check this with a lawyer.

 

[Alenka]

You can have partners that have no control, but AFAIK you cannot have partners that have no interest.


There has to be something. The lower you make it, the sketchier your LLP will look to EMIs and PSPs. Your LLP looks weird and strange.

I believe you can structure it in such a way that the partners are eligible for their interest only if each has paid in an agreed amount of capital. This way you can indicate a higher, less sketchy percentage, but actually pay out 0 to one of the partners.
I recommend to double check this with a lawyer.

But what is sketchy here? I will simply tell them that I’m the only owner of the LLP, they surely understand that such pass-through structures are used for optimizing tax base, so it should be ok with them.

Anyway, I’m more scared that US entity in structure will scary them more, because anything connected with US usually scares any financial institutions which outside of US.

 

[Sols]

But what is sketchy here? I will simply tell them that I’m the only owner of the LLP, they surely understand that such pass-through structures are used for optimizing tax base, so it should be ok with them.

You don't see what's sketchy about having an LLP where one person holds 99.99% of the interest and a Cayman Islands company owns 0.01%? Then they look at the Cayman company and find that its owner is the same person as the 99.99% holder.

Unless there is some other compelling reason to onboard you (i.e. some way to make a lot of money on you), most banks, PSPs, and EMIs will reject you.

 

[Alenka]

You don't see what's sketchy about having an LLP where one person holds 99.99% of the interest and a Cayman Islands company owns 0.01%? Then they look at the Cayman company and find that its owner is the same person as the 99.99% holder.

Unless there is some other compelling reason to onboard you (i.e. some way to make a lot of money on you), most banks, PSPs, and EMIs will reject you.

I don’t see anything sketchy that one person made US or Cayman entity just in order to form pass-through LLP entity, the reason he didn’t made LLP only with himself as partner - because LLP requires at least 2 partners to be formed.

So that he formed US / Cayman entity which he fully controls to have second partner to have ability to form the LLP. He did so to control 100% of shares of the LLP, because the person wants to optimize taxes legally.

What is sketchy here?

 

[Sols]

I don’t see anything sketchy that one person made US or Cayman entity just in order to form pass-through LLP entity, the reason he didn’t made LLP only with himself as partner - because LLP requires at least 2 partners to be formed.

So that he formed US / Cayman entity which he fully controls to have second partner to have ability to form the LLP. He did so to control 100% of shares of the LLP, because the person wants to optimize taxes legally.

What is sketchy here?

It's sketchy because you're using an LLP in a manner that is abnormal. If one person wants to form a company, then that person forms a normal LTD company. Even if there are multiple people, nine times out of ten, the founders form an LTD, not an LLP.

You're forming an LLP to not pay corporate tax. That's sketchy.
You're forming an LLP by inserting an artificial partner. That's sketchy.

I'm just telling you how most financial institutions will react. There are PSPs and EMIs that tolerate this degree of sketchiness, though.

Are you resident in the UK?

 

[Alenka]

It's sketchy because you're using an LLP in a manner that is abnormal. If one person wants to form a company, then that person forms a normal LTD company. Even if there are multiple people, nine times out of ten, the founders form an LTD, not an LLP.

You're forming an LLP to not pay corporate tax. That's sketchy.
You're forming an LLP by inserting an artificial partner. That's sketchy.

I'm just telling you how most financial institutions will react. There are PSPs and EMIs that tolerate this degree of sketchiness, though.

Are you resident in the UK?

Nope, UAE resident

 

[Sols]

A UAE resident forming a UK LLP with an artificial partner... You'll probably be relegated to high-risk EMIs that cost significantly more.

But you can do it. Forming the company in such a way is technically possible. Banking will be a struggle, though.