Profit Sharing

[P1ato]

I've recently launched a private equity fund with some partners, and we've seeded it with a couple of investments. We're required to co-invest a "meaningful" amount of capital, and receive a return on that plus a priority profit share (standard stuff for hedge funds, 20% over a 10% hurdle with a 50:50 catch up).

There's a chance that this could generate significant capital in a few years time, but there's also a chance we'll not reach the hurdle and will get no profit share.

My question is what structure is best for co-investment and receipt of promote: offshore company, Scottish LP etc.?

I was thinking of just setting up a UK Co with me and the Mrs as shareholders. In the year it pays out we would max out all Pension and ISA allowances, but we'd effectively take out the capital as dividends.

I also thought about setting up a Gibraltar Co as I own some property there, and could buy some more, but the companies house were very unhelpful.

My partners use an expensive Luxembourg structure, making use of some legacy companies they own (they're both extremely rich, whereas for me the annual administration costs are an issue).

If you have any experience of these structures your comments would be much appreciated.

[HootersGsy]

I've sent you a PM as this is what I do for a living...

[New POD]

P1ato said:

I was thinking of just setting up a UK Co with me and the Mrs as shareholders. In the year it pays out we would max out all Pension and ISA allowances, but we'd effectively take out the capital as dividends.

I didn't understand most of what you wrote, but you don't have to take any money at all if you don't want. You could leave all or some in the business, and take it in later years. Imagine taking a year off and having the ltd company pay you and wife a salary each of 9444, and then take some more as dividend. Or you could throw it all into more investments, (after paying the CT) I suppose it depends on your personal tax situation