The United Kingdom Limited Partnership

As I stated in the Digital Nomad Package for this system to work the US LLC will need to have ONLY ONE non-resident owner (whether that non-resident owner is an individual, trust, or foreign business entity). If there is more than one owner of the US LLC it will no longer be treated as a single non-resident alien, but instead will be treated as a US Partnership. Not ideal since you would then need to file a partnership tax return annually.

When there is more than one owner of the business it will be absolutely necessary to create a foreign entity to own the US LLC. Then the multiple owners can own that foreign entity. Unfortunately the International Privacy Trust is not the appropriate entity when there are more than one owners; it is only appropriate for one person. We suggest using a foreign corporate entity to own the US LLC. There are a lot of options for this, but we suggest replacing the International Privacy Trust with a United Kingdom Limited Partnership (not to be confused with the Limited Liability Partnership — a completely different thing). The price will be the same but it will now be possible to have more than one party as owners.

The United Kingdom Limited Partnership

There are many characteristics that make a business structure attractive, but one of the most common is a “Pass Through” or “Disregarded” tax treatment. This means that the entity itself is not taxed, but that the owners of the entity are taxed on their share of the entity’s profits. This is often beneficial in that it avoids double taxation, but also because there are often exceptions to taxation for some owners which can result in zero taxation. The United Kingdom Limited Partnership (hereinafter the UK LP) provides just such a feature.

The UK LP legislation was established in 1907 and has remained unchanged since then. It is easy to establish, and once established requires zero reporting since it is a truly 100% “pass through” entity. The income from the partnership is attributed to the partners without the need to file a partnership return in the UK. If the partners are not in the UK and the income is not derived from UK business, there will be no UK taxes and thereby no reports that need to be filed by anyone.

The advantages of the UK LP are profound. The ideal structure is to have the UK LP passively own the US LLC and the US LLC will then open bank accounts and operate the day to day business activities of the system.

The UK LP itself will be owned by the Limited Partners, and managed by a General Partner which will have a zero economic interest in the UK LP. For a reasonable fee we can provide you with a nominee General Partner. It is important to have a limited liability entity act as the General Partner because the General Partner does NOT have limited liability, and is in fact 100% liable for everything the UK LP does. This is not a big risk since the UK LP will not actually be doing any business, but will only own the US LLC. All the same it is wise to take precautions.

Now you may ask, why doesn’t everyone know about the UK LP? The primary reason that the UK LP is not more commonly used is that it is really not the ideal entity to use if you are a UK resident or a UK business that is taxable under the UK tax system. The Limited Company or another corporate entity would probably be much better, and give you better tax treatment in the UK. As such it is used primarily by non-UK residents who do not make a lot of noise about it since it really is a nice little secret.

If you want to take advantage of the privacy features and tax benefits of the International Privacy Trust the Limited Partners can choose to own the Limited Partnership Interests through a trust. The only rule that must be followed is that there is at least one individual who is a partner.