A limited liability partnership, is a type of business entity that combines some features of a partnership and a limited company. It is popular among professional service businesses, such as accountants and solicitors, in the UK.
Some of the advantages of an LLP in the UK are:
1. Limited liability: The members of an LLP have limited liability for the debts and obligations of the business, meaning that they are not personally responsible for any losses incurred by the LLP. They are only liable up to the amount of money or property that they invest in the business. However, they are still liable for any wrongful actions that they personally carry out.
2. Pass-through taxation: The LLP itself is not taxed on its profits. Instead, the taxes are paid by the individual members, who are treated as self-employed for tax purposes. This can help to reduce the overall tax burden on the business, as the members can deduct their expenses and losses from their taxable income.
3. Flexible profit sharing: The members of an LLP can decide how to share the profits and losses of the business among themselves, without any fixed rules or ratios. They can also decide how much capital to contribute and withdraw from the business.
4. No formalities and regulation: The LLP does not have to comply with some of the formalities and regulations that apply to limited companies, such as holding annual general meetings, appointing directors and shareholders, or issuing shares. The LLP only has to file its annual accounts and confirmation statement with Companies House, and notify any changes to its membership or registered office.
5. Respected jurisdiction: The UK is a well-established and reputable jurisdiction for doing business, with political and economic stability, a strong legal system, and a favourable tax regime. An LLP registered in the UK can benefit from its international recognition and credibility, as well as its access to various trade agreements and markets.
Also read: Is LLP the best choice for UK company setup? Can I set up LTD instead of LLP?
How can I form an LLP in the UK?
Follow these steps to form an LLP in the UK:
1. Choose a name: The company name must end with 'Limited Liability Partnership' or 'LLP', and cannot be the same as or too similar to another registered company's name. You can check the availability of your name on the Companies House register.
2. Have a registered address: This is the official address of your LLP, where you will receive correspondence from Companies House and HMRC. It must be in the UK, and it will be publicly available.
3. Have at least two designated members: These are the members who are responsible for managing the LLP and filing its accounts and confirmation statement with Companies House. They can be individuals or corporate entities, and they must be at least 16 years old. You can have more than two designated members, or all members can be designated members.
4. Have an LLP agreement: This is a written document that sets out how the LLP will be run, such as how profits and losses will be shared, how decisions will be made, and how members can join or leave the LLP.
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Registered accounts gets these benefits:
- Buy various types of services