Profit Sharing Regime and Capital Structures
Profit sharing in professional partnerships is probably the most emotive issue in practicing life and the larger the partnership the more difficult. We advise on the types of regime and on the mechanics that may be used to allocate profits whilst recognising that in most partnerships the only thing that partners look at at the end of the year is how much they can draw on their current account and how their draw compares with their peers!
An integral part of profit sharing is to link it with the capital structure and to determine the “right” level of borrowing from the bank. Having done this it is then necessary to consider the structure within which to operate – unlimited partnership, LLP or Limited Company and the tax issues surrounding each.
We have prepared a podcast to consider this topic further.