LLP in the UK is becoming a popular option for non-UK residents who want to register a company UK. They combine the benefits of corporate status with limited liability protection and are a tax-efficient vehicle for international trading. If the partners are not UK residents, the income earned outside of the country is not subject to UK taxation. UK LLPs have a quick registration process, low cost and minimal annual compliance obligations.
Eligible partner: 1. Anyone who is older than 16 is eligible, no matter which country he resides in.
2. Any corporation, trust or other legal entity.
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You can set up a solely owned LTD (Limited company) and make it a partner in the LLP with you as the other partner. However, it's possible that such an arrangement will be viewed as a fraud, in which case the LLP would lose its limited liability status.
An LLP must keep accurate and complete records of every transaction it makes and be able to determine its financial position at any time.
Within nine months of the accounting reference date, annual accounts must be filed at Companies House. Generally, the last day of the 12th month after the formation of a company provides as the accounting reference date.
In order to determine how much of the profit each partner will be required to report in the UK and how much is attributable to the non-UK resident partners, a partnership tax return must be filed.
Also read: Setting up a business UK - Limited Liability Partnership (LLP)
What are the differences between an LTD and an LLP?
1. An LTD can be set up by one person who is both a shareholder and a director, but an LLP needs at least two partners.
2. LTD must have at least one natural person as a director, but LLP partners are not required to be natural persons.
3. The shareholders in an LTD cannot manage a company—that is the responsibility of the directors, whereas all partners in an LLP have the right to manage the company directly.
4. An LTD has a written constitution that is filed at Companies House and is open for inspection, whereas an LLP does not. Partnership agreements are typically a part of LLPs, but they are not disclosed to the public.
5. The majority of partnership agreements specify how this can be done, and partners in an LLP can easily join and leave. Shareholders, however, are the owners of an asset (the LTD shares), which must be purchased from another shareholder or sold to a third party.
Also read: Do I need a registered office address during UK company formation?
All about Partnership Taxation:
1. LLPs are not taxable entities. The partners are responsible for reporting the income to the tax authorities in their respective countries of residence because it is received on their behalf and is attributable to them.
2. Every year, LLPs are required to file a tax return. The return's objective is to inform HMRC about the sources of income and profit of the LLP and how they were distributed among the partners.
3. Partners who are not UK residents are exempt from paying tax in the UK on any gains or income that were not made in the UK. This feature of UK tax law is what makes LLPs so popular among non-UK residents.
4. Profits from an LLP will be taxed at personal tax rates, which are higher than corporation tax rates if the income is generated in the UK and the partners are residents of the country. Due to this, it is challenging to keep the profits for further investment in the LLP.
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