When forming a business in the UK, you must choose the type of company registration that best suits your business needs. Which entity type—a limited liability partnership or a limited company—is suitable for your business? In this blog, you will get guidance on everything related to "LLP".
A limited liability partnership is a type of incorporated business structure similar to a limited company that was introduced by the LLP Act 2000. It is appropriate for industries that usually function as traditional partnerships (solicitors, accountants, dental practitioners, etc).
A limited liability partnership gets independent legal status and offers its members limited liability once it is registered with Companies House.
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It must be a profit-making business.
- It must have at least two partners (members), of which at least two have to be designated members and perform legal responsibilities of the business.
- There are no shares, shareholders or directors.
- A registered office address must be situated in the country where the company is registered.
- No need to pay corporation tax – each limited liability partnership member pays tax via Self-Assessment as a self-employed individual.
- Members must submit a limited liability partnership’s annual accounts and a confirmation statement to Companies House each year.
- Limit of each member’s liability is mentioned in a partnership agreement.
- Since a limited liability partnership doesn't have shares, capital investment from non-LLP members cannot be exchanged for ownership.
- Members must maintain PSC registers.
Also read: How to open a company in UK?
Every member's liability is limited to the amount they have contributed to the partnership whenever a limited liability partnership undergoes financial difficulties or a member of the partnership is prosecuted.
Limited liability partnerships do not pay corporation tax. Each limited liability partnership member pays tax via Self-Assessment as a self-employed individual.
Limited liability partnerships have equally flexible internal organisational structures as traditional partnerships. The legal obligations of the partners, their capital investments, and profit-sharing ratios can all be easily changed.
A limited liability partnership raises a venture's credibility in the marketplace. This is frequently more attractive to other businesses and larger corporations, and it is especially helpful when it comes to high-value contracts.
Appoint new members
In limited liability partnerships, there is no requirement to transfer or issue additional shares in order to add new members because there is no share capital. The appointment of new members just needs an agreement with existing members.