LITHUANIA CRYPTOCURRENCY EXCHANGE LICENSES

Are you looking for somewhere cost effective and easy to obtain a Cryptocurrency Exchange License?

 

If so (as an alternative to Estonia) you might want to check out the Lithuanian Cryptocurrency Exchange option.

 

Being recognized as a traditional finance jurisdiction within the European Union and European Economic Area (EU/EEA), Lithuania recently introduced a regime for the set up and Licensing of Cryptocurrency Exchange and Cryptocurrency Depository Wallet operator enterprises making it one of very few European Union (EU) members states with virtual currency licensing and authorization procedures.

 

Types of crypto activity authorization

 

There are 2 types of cryptocurrency business license one can obtain in Lithuania :
– Crypto currency exchange operator is a company or the affiliate of a company exchanging cryptocurrency owned by the client for a commission fee

 

– Crypto currency depository wallet operator is a company or the affiliate of a company managing client cryptocurrency depository wallets

 

The activities of the cryptocurrency exchange and cryptocurrency wallet provider need to be separated from the licensed financial activity (payment and electronic money institution, bank, etc.). Nevertheless, licensed financial institutions are allowed to serve the fiat payments of the crypto dealing companies and their clients creating an effective vehicle for crypto-fiat payments.

 

Unlike Estonia – which has recently brought in local substance requirements – (ie to obtain/hold a Cryptocurrency Exchange License in Estonia you now need to have a local office, local/resident Compliance Manager & a Management Board Member on the ground), in Lithuania there are no such specific requirements as in Estonia. Hence, the setup of a Cryptocurrency Exchange in Lithuania can be completed in a simpler manner in terms of both set-up and on-going costs.

 

For Lithuania, in terms of set up costs, you would need to budget to spend around 12,000 Euros. On-going fees can be kept to a minimum as no specific requirements for local personnel or office exist to date. We can also support with full service compliance, including local AML officer services as required. (OCI has a representative office in Lithuania and can provide full setup/support in Lithuania should you decided to apply for a Crypto Exchange and/or etc license there).

 

Initial Coin Offering ICO registration for token distribution in Europe

 

Initial Coin Offerings (ICOs) and token distributions to investors in Europe will require specific authorization. Separate AML/KYC and other reporting requirements apply to any Lithuanian company carrying out ICO activities or attracting financing through the public distribution of tokens and virtual coins to investors. Lithuanian registered legal entities (companies) as well as Lithuanian registered affiliates of EU and non-EU companies are allowed to register and publicly distribute virtual coins offering them to the investors in all EU/EEA area.

 

AML/KYC requirement for the companies holding cryptocurrency authorization

 

Lithuanian registered legal entities (companies) and Lithuanian registered affiliates of EU and non-EU companies can apply for Crypto authorization. Applicants need to have in place AML/KYC polices and implemented procedures necessary for the provision of cryptocurrency related activities. Cryptocurrency exchange and crypto currency depository wallet operators are supervised by the Lithuanian Financial Crime Investigation Unit – FIU.

 

Members of the Management Board as well as Ultimate Beneficial Owners (UBO’s) of the company need to meet the requirements of impeccable reputation. (ie a local spin on The Common Law equivalent of “Fit & Proper”). Conveniently, there is no requirement for directors or members of the board to be Lithuanian/European residents.

 

General requirements for any Lithuanian entities engaged in cryptocurrency activities:

– Customer identification and verification

– Reporting to Lithuanian FIU

– Record Keeping and client data

– Employment of Lithuanian AML officer

– Preparation of AML/KYC polices and implementation of internal control procedures

 

OCI Lithuanian cryptocurrency registration and authorization

 

OCI can provide the full range of cryptocurrency exchange and cryptocurrency depository wallet operator authorization services including company registration in Lithuania and preparation of all required AML/KYC policies and procedures.

 

After the authorization/registration/licensing process is complete we can also provide bookkeeping and Lithuanian FIU compliance services for authorized entities as/if needed.

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

DISCLAIMER: OCO Ltd are not Tax advisers or Legal Advisers. You should seek local tax, legal and financial advice before committing to set up an Offshore Corporate or Fiduciary Entity.

 

 

 

What is a Purpose Foundation?

A Purpose Foundation is a particular type of Private Foundation which, unlike a conventional Foundation (ie which has certain person/s or a category of person/s nominated to be beneficiary/s), can be formed to hold assets for a purpose without conferring a benefit on any specific person. An example of such a purpose is to hold shares in a company.

 

Purpose Foundations are currently used, among other things, in conjunction with asset financing transactions and securitizations.

 

They are also sometimes used to hold the shares in a Private Trust company (PTC) structure, where confidentiality and control issues are important. A key advantage of using a Purpose Foundation in such a scenario is that there are no registration or disclosure requirements of such Trusts at law generally speaking. Therefore the ownership of the PTC will be confidential, and the shares in the PTC will be immune from an attack on the Settlor (ie the person who sets up the Trust).

 

Generally speaking, there are two types of Foundations ie Foundation with beneficiaries and Foundations which are set up to fulfil a specific purpose. A Foundation set up to fulfil a specific purpose does NOT needs to name any person or class of person as a beneficiary. Hence, because there are no beneficiaries attached to the Foundation (a) it’s impossible to argue that any particular person has a legal or beneficial interest in Foundation assets and (b) it’s impossible to argue that any particular person is entitled to receive income from the Foundation.

 

Recently a lawyer friend succeeded in registering a Purpose Foundation in Seychelles where the sole stated purpose of the Foundation was to own 2 Mauritius Companies.

 

The nett result of deploying a Purpose Foundation in such a scenario?

 

  1. Assets held by the Foundation should be safe from attack by creditor of the Foundation’s creator; and
  2. If the Foundation is set up in a nil tax jurisdiction, and say it owns a Company incorporated in a nil tax jurisdiction – which Mauritius is – (and provided the Foundation and any Companies it owns are not seen to be controlled from onshore) you may potentially end up with a scenario whereby income streams owned by the Foundation remain beyond the reach of the onshore taxman – In such a scenario, you should only have to report/pay tax on income paid to by any Company owned by the Foundation or on distributions paid to you by the Foundation

 

Flexibility is everything. No doubt you’ll be pleased to hear that a Purpose Foundation does not have to remain a Purpose Foundation for life; A Purpose Foundation (by amending its Charter) can, later on down the track, morph into a Foundation with beneficiaries!

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

DISCLAIMER: Offshore Companies International Ltd trading as www.offshoreincorporate.com are not Tax advisers or Legal Advisers. You should seek local tax, legal and financial advice before committing to set up an Offshore Corporate or Fiduciary Entity.

 

How To Use An Offshore Company To Gamble Online Professionally

Online Gambling is an activity which lends itself well to an Offshore Corporate Structuring Strategy.

 

No matter what you bet on, an Offshore Corporate Structure can assist you potentially to defer paying the tax you might otherwise have to pay at home on betting profits (allowing you to grow your capital much faster in the meantime thanks to the power of compounding)

 

To summarize how it would work is:

 

  • You set up a zero tax Offshore Company or an International Business Company (“IBC”)
  • The IBC opens an account with a/the betting house
  • You are appointed as the IBC’s authorised trader/better (ie you place the bets on behalf of the company)
  • The Company would have an Offshore Management system (ie a nil tax jurisdiction based Nominee Director)
  • Ideally the Company would also have an Offshore Ownership system (ie the Company would be owned by a Private Foundation)
  • On the face of it the IBCs trading profits are being generated in a nil tax environment tax free/offshore (ie provided the IBC Is structured/administered in a certain way)
  • When you need some living/spending money the IBC pays you a wage, or consulting fees or a commission (eg a percentage of betting profits generated)
  • That living/spending money can be paid to your local bank account (which means it would be assessable income wherever you are ordinarily resident for tax purposes – though you should also be able to claim a sizeable amount of allowable deductions eg for home office, car, equipment, insurances, travel, stationary etc etc to reduce the amount of your “taxable” income at home)
  • Larger amounts could be structured as part of a loan agreement between you and the Company (ie you would have the right, as you would with a line of credit or overdraft, to borrow money from the Company from time to time. (Generally speaking, such a receipt is a capital receipt not income and hence shouldn’t be caught by “income tax” rules)
  • For larger purchases (eg if you want to by a house or an investment) such investment could be made directly by the Company or by an Offshore subsidiary Company
  • A sizeable amount of the Company’s trading profits could be banked and or reinvested Offshore potentially tax free.

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

DISCLAIMER: OCO Ltd are not Tax advisers or Legal Advisers. You should seek local tax, legal and financial advice before committing to set up an Offshore Corporate or Fiduciary Entity.

 

 

How To Buy & Sell Cryptocurrencies Peer to Peer Using an Offshore Company

With the traditional Cryptocurrency Exchanges becoming slower and clunkier to use by the day smart Cryptocurrency Investors and Traders are looking at alternative ways to buy & sell Cryptocurrency with a view to making a Trading profit.

 

Such activity typically begins with a Buyer being introduced to a Seller (or vice versa) via an Online Billboard type site.

 

The savvy Cryptocurrency Trader buys his Cryptocurrency at wholesale prices. The Trader then meets a potential Buyer online eg via a Billboard type site. The Buyer and the Trader agree on a price for the Cryptocurrency. The Buyer sends Fiat currency to the Seller/Trader’s nominated bank account. The Seller/Trader then transfers cryptocurrency from his/her wallet to the Buyer’s wallet and the transaction is completed. Like buying/trading real estate, if the Trader has bought his/her Cryptocurrency at the right price, he/she will have made a profit on the sale.

 

(Depending on the laws of the country wherein you’re based) Such an enterprise can lend itself well to an “Offshore” Corporate Structuring Plan. Here’s how it might work from an “Offshore” perspective:

 

  • You set up a zero tax Offshore Company eg an International Business Company (“IBC”) with an Offshore (ie nil tax jurisdiction based) “Nominee” Director (& ideally, eg if you live in a country which has CFC rules, a Private Foundation shareholder)
  • The IBC opens an account with the Billboard provider/s (probably with 2 providers one where you buy Cryptocurrency, one where you sell Cryptocurrency)
  • You are appointed as the IBC’s authorised trader (ie you place the advertisements and then negotiate buy and sell orders on behalf of the Company)
  • Once a month the IBC’s board meets and ratifies all the buy and sell orders that you’ve placed in the previous month.
  • Given the Company has no physical office and all deals are done on the internet, from an International taxation perspective, the IBC’s trading profits are generated from the venue from which the Company is seen to be managed and controlled.
  • Management & Control lies in the hands of the Company Director. The director is based Offshore ie in a nil tax environment. Hence profits are booked in a nil tax environment.
  • Provided the Company is setup & administered in a particular way (& depending on the laws of your home country) potentially you should only have to declare/pay tax on income/distributions paid to you by the Offshore entity

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

DISCLAIMER: OCO Ltd are not Tax advisers or Legal Advisers. You should seek local tax, legal and financial advice before committing to set up an Offshore Corporate or Fiduciary Entity.

 

 

How To Transfer Ownership of Cryptocurrency to an Offshore Company

We are often asked “How can I transfer ownership of my Cryptocurrency to my Offshore Company so that any gain or profit realized upon sale of the Cryptocurrency is booked Offshore ie in a nil tax environment?”

 

Certainly, in most, if not all, jurisdictions (if you are the owner of a quantity of Cryptocurrency) if you’ve bought Cryptocurrency cheaply then made a profit, upon converting that Cryptocurrency into Fiat currency CGT ie Capital Gains Tax (or Income tax or Corporate/Business tax) would apply.

 

In the perfect world, before you bought/acquired the Cryptocurrency, you would have formed a nil tax Offshore Company to own invest in said Cryptocurrency. That way if/when the Cryptocurrency is sold for or converted to Fiat currency no tax would be payable by the Company in the jurisdiction where it’s incorporated.

 

For many people that is not the case.

 

As at the time of writing a LOT of people (who own Cryptocurrency in their own names) are betting that the price of certain Cryptocurrencies are going to rise substantially in the short to medium term. In the perfect world, at the point in time if/when the Cryptocurrency value say has increased substantially (eg doubled in value) – and you decide to sell – that Cryptocurrency would be owned by a nil tax Offshore Company.

 

So how might you be able to shift ownership of that Cryptocurrency to a nil tax Offshore Company prior to said Cryptocurrency substantially increasing in value, without creating a taxable event (eg a disposal/taxable event for CGT purposes) along the way?

 

Here are a couple of possibilities:

 

  1. Form a tax free Offshore Company (ideally with an “Offshore” Management/Ownership structure)
  2. Open a Cryptocurrency wallet in the name of this Offshore Company
  3. Negotiate/sign off on a loan agreement (or investment agreement) with the Company
  4. Transfer Cryptocurrency held in your personal wallet to the Offshore Company’s Cryptocurrency wallet
  5. When the Company converts the Crytocurrency to Fiat currency the Company pays interest on the loan (or an investment return as agree) to you personally
  6. Presumably the interest or investment return would be significantly less than the profit generated by the Offshore Company upon selling the Cryptocurrency/converting it to Fiat currency
  7. You would pay declare and pay tax locally on the interest payment/investment return
  8. The remainder of the money could be banked or re-invested Offshore potentially tax free

 

NOTE: Whether the above strategy will work or not in your particular case depends on the laws of the jurisdiction in which you are based.

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

 

How To Convert Your IBC’s Cryptocurrency in to Fiat Currency

A lot of OCI clients use Offshore Companies to (privately and or tax effectively) Trade (or to Invest in) Cryptocurrency.

 

Why?

 

Because if you set up a tax-free Offshore Company as your Bitcoin Investment/Trading vehicle before you start buying then any Capital Gain realised when you sell your Bitcoin/s could potentially be realised free from tax.

 

Are you one of those lucky people?

 

With the value of Bitcoin having risen steadily over the past year you may be thinking it’s a good time to cash out all of (or perhaps a part of) your Offshore Company’s Bitcoin (“BTC”) Holdings.

 

This article deals with ways that one might discreetly offload BTC assuming at the time of sale your Cryptocurrency is held/owned by a nil tax Offshore Company.

 

The easy way historically has been to convert Bitcoin to Fiat Currency using a Licensed Cryptocurrency Exchange (eg Binance, Bitmex, Huobi Global etc) and then have the Exchange send the Fiat Currency to your Offshore Company’s Bank Account.

 

One of the challenges you will face using such a service however is that many banks won’t accept monies coming from a Cryptocurrency Exchange.

 

What you might want to do then (ie rather than engaging an Exchange to convert your Cryptocurrency to Fiat currency) is sell your cryptocurrency via a Peer to Peer Introducer (here is one such example: https://localbitcoins.com/ )

 

Here’s how that could/would work:

 

  • You/your Company would appoint a law firm to act as an Escrow Agent (or you could appoint a specialist Escrow Service Provider).
  • The buyer pays his fiat currency into your law firm’s Trust Account (also known as a Client Account) or into the Trust Account of your Escrow Service Provider.(The buyer’s funds are held in Escrow).
  • Once you have confirmation that the Law firm/Escrow Provider has received the payment from the Buyer and his funds have cleared you then transfer the Cryptocurrency from your wallet to the buyer’s wallet.
  • You provide proof to the Law Firm/Escrow Provider that the payment of Cryptocurrency has been sent from your wallet to the Buyer’s wallet.
  • The Law Firm/Escrow Provider then transfers the Fiat currency to your nominated bank account.

 

You would obviously have to pay a fee to the Peer to Peer provider for arranging the introduction.

 

Another way to convert BTC quickly into Fiat currency is electronically utilising specialized service providers eg someone like Metal Pay or Wirex or Revolut etc. (Check this article for details: https://news.bitcoin.com/how-to-quickly-cash-out-from-crypto-to-fiat/#:~:text=If%20you%20want%20to%20cash,can%20withdraw%20from%20an%20ATM. )

 

Obviously whichever method/service/service provider you use you’ll want to do you Due Diligence before engaging them.

 

Given the Crypto sector in many parts of the world is still unregulated you’ll want to ensure ideally that you’re dealing with a licensed professional establishment, with a proven track record of meeting their obligations.

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

Disclaimer: OCO Ltd are not Tax advisers or Legal Advisers. You should seek local tax, legal and financial advice before committing to set up an Offshore Corporate or Fiduciary Entity.

 

 

 

Can One Offshore Company Own Multiple Businesses?

We are often asked can my new Offshore company own more than one business?

 

The short answer is one Company can own many businesses but what the question really should be is this: Is it advisable to have one Company owning multiple businesses?

 

Let’s look at the pros and cons….

 

Let’s say you’re the budding young entrepreneur. And that when starting out you’ve got 3 solid business ideas but you’re unsure of which one is likely to take off… after all business is risky and you can never be sure, right?

 

Hence, understandably, you’re not going to want to go to the cost of setting up 3 separate Companies given its possible that one or more of the new businesses might never take flight.

 

But what if all 3 businesses do take off and they are all owned/operated by the one/same Company. What’s the disadvantage of that?

 

In short, the risk with that kind of structure is that if all 3 businesses are owned/operated by the one/same Company – and any one business fails – assets owned by and/or cash in bank accounts held by the other businesses are at risk of attack from the failed business’s creditors. Worst case scenario? The badly performed business/es could owe so much that it/they end up sending the whole Company broke killing off the profitable business/es in the process.

 

The other advantage of having businesses owned by separate Companies is that when it comes time to sell it’s going to make the marketing and sale process a lot easier (eg the buyer, in effect, only has to do due diligence on one business not 3) and maybe less expensive, eg you could sell the shares in the Company rather than the assets of the Company and potentially avoid prohibitive stamp duty being imposed on the sale proceeds/contract price. (Presumably this would make your business a more attractive proposition to would be buyers).

 

Yes you could set up a 2nd or 3rd Company later and at that time transfer ownership of the 2nd business to the 2nd Company and the 3rd business to the 3rd Company as the case may be. However, in that scenario:

(a)   A Share Sale/Purchase agreement should be entered into on reasonable/normal commercial terms and signed by the existing Company and the new Company (eg the new owner ie the 2nd/3rd Company will need to be seen to have legally bought the business)

(b)  The price paid for the business by the new Company will need to be seen to be fair market value

(c)   The new owner will need to be seen to have paid for the business before it is registered as the new owner thereof

 

If the above boxes are not all ticked the transfer could be set aside later as a sham transaction leaving tax/legal etc liability in the hands of the former owner (ie the first Company).

 

In summary, for the reasons detailed above, it is always preferable where practicable to have separate businesses owned by separate Companies, from the outset.

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

Disclaimer: OCO Ltd are not Tax advisers or Legal Advisers. You should seek local tax, legal and financial advice before committing to set up an entity such as that described above.

 

 

How 2 Use an Offshore Company 2 Trade Gold & Silver

The Trading of Precious Metals such as Silver & Gold is an activity which lends itself well to an Offshore Corporate Structuring Plan.

 

To summarise how it would work is:

  • You set up a zero tax Offshore Company or an International Business Company (“IBC”)
  • The IBC opens an account with a Broker
  • You are appointed as the IBC’s authorised trader or Trading Manager (ie you are authorised to place buy and sell orders on behalf of the company)
  • The Company would have an Offshore Management system (ie a nil tax jurisdiction based Nominee Director)
  • Ideally the Company would also have an Offshore Ownership system (ie the Company would be owned by a Private Foundation)
  • On the face of it the IBCs trading profits are being generated in a nil tax environment tax free/offshore (ie provided the IBC Is structured properly)
  • When you need some living/spending money the IBC pays you a wage, or consulting fees or a commission (eg a percentage of trading profits generated)
  • That living/spending money can be paid to your local bank account (which means it would be assessable income wherever you are ordinarily resident for tax purposes though you should also be able to claim a sizeable amount of allowable deductions eg for home office, car, equipment, insurances, travel, stationary etc etc to reduce the amount of your “taxable” income at home)
  • Larger amounts could be structured as part of a loan agreement between you and the Company ie you would have the right like a line of credit or overdraft to borrow money from the Company from time to time.  (Generally speaking, such a receipt is a capital receipt not income and hence shouldn’t be caught by “income tax” rules
  • For larger purchases (eg if you want to by a house or an investment) such investments could be made directly by the Company or by an Offshore subsidiary Company
  • A sizeable amount of the Company’s trading profits could be banked and or reinvested Offshore potentially tax free.

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

Disclaimer: OCO Ltd are not Tax advisers or Legal Advisers. You should seek local tax, legal and financial advice before committing to set up an entity such as that described above.

 

 

English Limited Partnerships (LPs) – Overview

Generally speaking, a Partnership, a is a business owned by two or more individuals formed with a view to a profit.

 

At Common Law Partners in a partnership share profits equally and are considered jointly and severally liable for the debts of the Partnership.

 

In most jurisdictions a Partnership is not an income reporting, or tax paying, entity; it is rather a flow through vehicle ie it invoices and receives payment from customers and pays suppliers/creditors and then “passes through” the remaining profit to the partners who report the income/account for taxes wherever the Partners may be resident for tax purposes.

 

There are three forms of partnerships: general partnership, joint venture, and limited partnership. The three forms differ in various aspects, but also share similar features.

 

A limited partnership (LP) is a partnership made up of two or more partners whereby the general partner oversees and runs the business while the limited partner contributes capital to, but does not partake in managing, the business. The general partner has unlimited liability for the debt, and any limited partners have limited liability up to the amount of their investment.

 

The English LP

 

There are 3 options for set up of an LP in the UK ie

  • An LP formed in England & wales
  • A Scottish LP
  • A Northern Ireland LP

 

In order to establish an LP in England/Wales a duly completed and signed Form LP5, together with the filing fee, must be submitted to Companies House in Cardiff.

 

The Form LP5 contains the following information:

 

  • The name of the LP, which must end in Limited Partnership or LP. A Limited Partnership registered in Wales may end in Partneriaeth Cyfyngedig or PC;
  • The general nature of the business;
  • The principal place of business address;
  • The full name of the general partner and each limited partner;
  • The term of the partnership, if any;
  • A statement of limited liability
  • A statement of the capital contribution of each Limited Partner

 

Provided that the Form LP5 is in order, the LP will come into existence on registration of the form at Companies House.

 

The Partners

 

LPs must have at least one general partner and one limited partner at all times. Partners can be individuals or corporate bodies and there is no restriction as to the nationality, or residence, of the partners.

The general partners are responsible for the management of the LP and are jointly responsible for the debts and obligations of the LP. In contrast, the Limited Partners play a passive role in the business affairs, simply providing capital contribution. The Limited Partners are afforded the benefit of limited liability protection, provided that they do not engage in the management of the LP.

 

The Partnership Agreement

 

While not legally required, it is recommended that the partners enter into a private, written partnership agreement. Such an agreement would generally detail the nature of business, the administration of the LP, the division of profits and the dissolution arrangements.

 

The Accounts

 

LPs must keep appropriate records of their financial affairs to enable the financial position of the LP to be determined at any time. LPs are not required to file their accounts with Companies House unless the Partnership (Accounts) Regulations 2008 apply.

 

The Taxation

 

LPs are tax transparent, therefore, in order to assess tax liability, the UK tax authorities will look to the partners of the LP rather than to the LP itself. In addition, if the LP does not trade in the UK, and the partners are not resident in the UK, the partners will not be subject to UK taxation.

 

Regardless of whether the partners are subject to UK taxation or not, LPs are required to file an annual Partnership Tax Return and accompanying accounting schedules with HMRC (ie the UK Tax Authority/Dpt) . The return must show each partner’s share of the profits or losses of the activities of the LP.

 

The Dissolution

 

In the event of the dissolution of an LP, the general partners are required to wind up its affairs. It is best practice to notify Companies House of the dissolution, however, the LP will continue to exist on the index of names held by Companies House.

 

Key Features and Benefits of the English LP

 

There are a wide range of benefits in utilising English LPs:

 

1. Limited Liability for the Limited Partner: The Limited Partner can benefit from receiving profits in the English LP whilst also benefitting from limited liability on their investment.

2. Use of Corporate General Partners: Although General Partners have unlimited liability, corporate partners are permitted. Therefore, if correctly structured, they can protect themselves from unlimited liability.

3. Fiscal Transparency: The English LP is fiscally transparent, meaning that all income, profits and losses flow through to the Partners.

4. Filing Requirements: English LPs which are not defined as ‘qualifying partnerships’ are required to prepare its accounts under the Partnership (Accounts) Regulations 2008 (SI 2008/569) in order to demonstrate its financial positions and to assist with the preparation of the Partnership tax return. English LPs, which is not a separately legal entity, are not currently required to file a confirmation statement or maintain a person(s) of significant control register for inspection to the public.

5. Privacy of the Limited Partnership Agreement: The English LP may have a written Limited Partnership Agreement between the general partner(s) and the limited partner(s). If the English LP has been registered for a specific purpose, the clauses of the agreement may be tailored depending on that purpose. The partnership agreement might also state the rights and obligations of the partners including the capital contributions and profit sharing ratios. The English LP benefits from maintaining the limited partnership agreement as a private document which does not need to be filed or disclosed with Companies House.

 

With careful structuring a UK LP will not be subject to UK taxation.

 

SUMMARY

 

An LP registered in England is not a separate legal entity, hence it must contract through a/the General Partner.

 

Limited Partnership consists of 1 (or more) general partners who exercise its management, and 1 (or more) limited partners who made a contribution into partnership’s capital (by means of money or other property with monetary evaluation).

 

The general partner is liable for all debts and obligations of the partnership. The limited partner’s liability is limited to the amount of contribution he made.

 

An English LP has no directors and secretaries. The General partner exercises management and enters into transactions on behalf of the LP (as well as other persons authorized by the partnership by Power of Attorney).

 

An English LP itself is not subject to taxation in the UK. The LP’s profit is distributed to its partners who must pay taxes in their country of tax residence.

 

An English LP must prepare annual accounts, but if it is the case that the general partner is a foreign (not British) company, filing of the accounts with Companies House is not required.

 

An English LP and each of its partners must file annual tax returns.

 

As a Limited Partner:

 

  • You contribute an amount of money or property to the business when it’s set up but you are only liable for debts up to the amount you’ve contributed.
  • You can’t manage the business can’t remove your original contribution
  • You must register for Self Assessment with HM Revenue and Customs (HMRC).

 

As a General Partner:

 

  • You are liable for any debts that the business can’t pay
  • You control and manage the business
  • You can make irreversible (‘binding’) decisions for the business
  • You can apply for your business to act as an authorised contractual scheme (ACS
  • You must register the business with Companies House and register the business for Self Assessment with HMRC (you must also register the business for VAT if you expect sales to be more than £85,000 a year)
  • You act for the business if/when it’s wound up and dissolved

 

It should be noted that (unlike a Scottish LP) an English LP is not a legal entity.

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

Disclaimer: OCI Ltd are not Tax advisers or Legal advisers. You should seek local tax, legal and financial advice before committing to set up an entity such as that described above.

 

 

 

How to Use a UK Limited Liability Partnership for International Business

A United Kingdom Limited Liability Partnership (LLP) is a very popular vehicle for international commercial activity.  This is because the UK LLP is a body corporate with a legal personality that provides its members with limited liability, and at the same time, it’s tax transparent.

 

The law states that a trade, profession or business conducted by a UK LLP shall be treated as though carried out in partnership by its members.  The effect of this is to ensure that members of an/the LLP are taxed as though they are partners in a partnership.

 

Reduced Taxation Opportunities for International Business 

 

The UK only taxes non-residents of the UK on their UK source income.  Therefore, when a UK LLP is engaged in a trade, profession or business, with a view to making a profit, and has no UK members or UK trade, no permanent establishment or UK source income, the UK has no authority to tax the LLP or its members. (The members and the shareholders of the members may potentially have a tax liability in their home jurisdictions).

 

Opportunities are therefore optimised where UK LLPs are formed to carry out non UK business by companies in zero or low tax jurisdictions.

 

Can a UK LLP Benefit from the UK’s Double Tax Treaties and Obtain a Tax Residence Certificate? 

 

As a UK LLP is not taxable, it cannot obtain a tax residence certificate.  In addition, as a UK LLP is not subject to tax on its profits, it cannot enjoy the benefit of the UK’s network of double tax treaties.

 

The relevant jurisdiction to obtain a tax residence certificate and for the application of double tax treaties, is the country of residence of the LLP members.

 

Can a UK LLP register for VAT in the UK? 

 

In theory as a UK LLP is considered to be a body corporate for VAT purposes, it should be possible to register an LLP for VAT, even if the LLP is not trading in the UK.

 

In practice however, a UK LLP without a UK trade, UK place of business or UK members will probably find it difficult to register for VAT in the UK.

 

Can a UK LLP which has no UK Members, UK Trade or Source Income have a UK Virtual Office? 

 

A UK address and telephone answering service are not on their own sufficient to create a permanent establishment in the UK.

 

If all activities are undertaken outside the UK, having a UK virtual office should not cause non-UK members of a UK LLP without a UK trade or source income to have a UK tax liability on the profits of such an LLP.

 

Who has the Powers of Management of an LLP ?

 

The powers of management rest with the members of an LLP.  It is sensible to have a members’ agreement which sets out the authority of the members to bind the LLP.

 

Where a member’s authority is limited, if the member acts broadly within the ambit of the LLP’s business, his acts are likely to bind the LLP. This is the case even if the member was acting outside of his authority, as defined in the members’ agreement, provided that the party with which the member is dealing does not know of such limitations to the powers of the member.

 

Do UK LLPs have to be Audited? 

 

The members of a LLP are obliged to prepare a balance sheet and profit and loss account for each financial year of the LLP.  These accounts, together with a copy of the Auditor’s report (where applicable) must be delivered to the Registrar of Companies.  The accounts will then be in the public domain and are open to inspection.

 

LLPs that are regarded as small are exempt from an audit requirement.  To qualify as a small LLP the LLP must have gross assets of not more than £3.26 million, and its turnover must not exceed £6.5 million.  In addition, the LLP must not be part of a group where a public company is a member, or where the group is not defined as small.

 

It should be noted that even where an audit is not required, members are still required to prepare and file true and fair accounts.

 

Is there a Minimum Capital Requirement? 

 

There is no minimum capital requirement for the formation of an LLP.  An LLP must, however, have at least two members.  The members may be corporate bodies and may be incorporated and resident anywhere in the world.

 

Are there any Activities for which an LLP should not be Used? 

 

An LLP is tax transparent if it is engaged in a trade, profession, or business with a view to making a profit.  An LLP is therefore not tax transparent for clubs, charities or similar organisations. 

 

There is some anti-avoidance legislation and, in particular, if a pension fund is a member of a LLP which invests in property, that LLP will not be tax transparent.

 

UK resident members of an investment LLP will not be able to offset interest charges against income they receive from such an LLP when calculating their taxable income.  This does not however affect non-UK members of an investment LLP that has no UK source income.

 

Summary

 

LLPs are becoming increasingly popular. This is largely due to the fact that no personal liability falls on a member of an LLP for contracts or debts of the LLP and there is no joint or several liability for the negligence of any other member.

 

If correctly structured, international business operated by UK non resident members will not be subject to UK taxation, but will, nevertheless, present a UK presence to the outside world. 

 

NOTE: OCI are not legal or tax or financial advisers. Local laws can have an impact. Hence you should seek local legal, taxation and financial advice before committing to establish a structure such as that described above. 

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com