Tax advantages for LLCs?!

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  • Profile photo of alisharifazadeh
    alisharifazadeh
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    Greetings,

    In F3 study text (BPP), under the advantages of Limited Liability Companies, it’s stated:

    Quote:
    There are tax advantages to being a limited liability company. The company is taxed as a separateentity from its owners and the tax rate on companies may be lower than the tax rate for individuals.

    Is this really the case?

    As far as I know, investing in LLCs has a potential drawback of ‘double taxtation’,i.e. you pay a tax on your shares’ earnings + a tax on your personal income.

    Anyone dare to illuminate?

    Regards,

    Ali


    Profile photo of Seah
    Seah
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    According to UK tax, individual’s income tax will be based on 40% for higher rates (£37401 and above) but for corporate tax rate it is not more than 30%, plus for sole traders and partnerships, each individuals will have to pay their own tax but for limited company, the income is combined and tax on that income only, company may also be able to have more deductions on capital allowance and so on compared with sole traders and partnerships, check about the rates here http://www.accaglobal.com/pubs/students/acca/exams/f6/exam_docs/uk/f6uk_examdoc.pdf


    Profile photo of alisharifazadeh
    alisharifazadeh
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    • Topics: 5
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    So, if I own 100 shares of X company and my earnings for shares is 40k, I will be taxed 40% or higher/lower?

    Thanks


    Profile photo of Seah
    Seah
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    You will be taxed for 40%, but if you are company it will be less than 30%, this is according to UK taxation, we MYS taxation does not have this kind of advantage :)

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