Chris Thorpe considers some important tax issues when considering incorporation.
The question as to whether a business should operate through a limited company is often dictated by the tax implications, though not always – insulation of the individual from commercial risks is often reason enough.
The term ‘incorporation’ can also include transferring a business (usually a partnership) into a limited liability partnership (LLP) as they, like limited companies, are bodies corporate with a separate legal identity.
However, LLPs are treated exactly the same as ordinary partnerships for tax purposes, i.e., they are transparent with the partners (or ‘members’ as LLP partners are known) taxed on their profit or capital shares. When a partnership becomes an LLP, it is essentially a non-event for tax purposes, even though a new legal entity is operating the trade; however, becoming a
