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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