English LLP companies

 (Limited Liability  Partnership - LLP)- is the new way for international tax planning.

 Limited Liability Partnership- is a new form of legal entity entered in English  legislation in April 6 of 2001, and is supported by the Limited Liability Partnership Act of 2000 , Limited Liability Partnership Regulations of 2001 and articles of Companies Act of 1985. It is a total different form of legal entity and must be not confused with the general Partnership or Limited Partnership.

This kind of legal entities is much alike with the legal entities in USA known as "Limited Liability Companies - LLC". This form of legal entity was not formed for the attraction of offshore business. With the growth of  economy, professional organizations such as advocates, accountants and other types in which the professionals use their intellectual abilities, the conservative types of legal entities became to tight. the new form offers unlimited liability of one of the participants "in exchange" with the release from corporation tax. However, increase of the number of such firms, increase of their income and especially increase of the potential legal actions against them, made the conservative type of such entity unacceptable.

The main advantage of the new form - LLP -is that the liability of all the participants is limited (as in LTD companies), and there is no obligation for the issue of share capital. In case bankruptcy the director is not liable. Liable are the participants of the company. The minimum number of such company is 2 participants (legal or physical) without any requirements about their residency. As in the working agreement there is no list about the activities of the partnership, they have the right to do all the legal kinds of business for which special license is not necessary. However, the company is taxed as partnership. This means that the income of the partnership (income from capital increase is also concluded), are not a matter of separate taxation but is taxed only as a personal income of each participant.

This kind of company is not subject of "double" taxation. the participants of the company which are not English residents, don't pay income tax for income from sources outside England.  In company's financial statements it is necessary to indicate if the company invested fund in the English Pension and social security fund or English insurance companies.

Income received from these sources, will be considered by the authorities as income from local sources. This is for the benefit of the local professionals and has several after-effects for the international tax planning.

With this way , this legal entity with non-resident participants and business activity outside England, is operating actually in offshore (tax free) regime. By this, an LLP English company, becomes the ideal form for the international tax planning.

Of course in this case, personal income of the participants is also tax free in England. This income it is taxed according the legislation of the country in which they are considered as residents. For this reason it is always better to use as participants offshore  companies registered for example in British Virgin Islands.

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