Use of service companies in partnerships

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance

Use of service companies in partnerships

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance
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This guidance notes looks at the use of service companies within a partnership / LLP structure and what benefits could arise together with any potential downsides and risk areas. For more detailed commentary see Ray: Partnership Taxation, Ch 23.

What is a service company?

Typically, a service company will be a limited company run alongside a partnership. The share capital may be owned by the partners personally or as a partnership asset. There may be some advantages to holding share capital within the partnership, for example, an advantageous CGT treatment if there is a change in partnership sharing ratios. See the Capital gains of a partnership guidance note.

The service company typically provides a number of services to the partnership. This may include:

  1. employing staff

  2. owning or renting premises and dealing with property related outgoings

  3. owning equipment such as plant and machinery, motor cars etc

  4. providing administrative services, and

  5. other back office functions

In return, the service company will be paid a fee by the partnership equal to

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  • 04 Mar 2024 07:32

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