UK LLP vs Ltd Company

UK LLP Formation

The main advantage of a UK LLP vs Ltd Company is that it is not subject to Corporation Tax. UK LLP members only pay personal income tax based on their residence and where the trade takes place (outside or in the UK). It is possible to structure business in a the way that UK LLP will not pay any tax in UK. In order to achieve that each member of UK LLP should not be UK registered companies, UK residents and no trade is made within the UK. UK LLP vs Limited Company will not pay Corporation Tax if members are not companies and trading in the UK.

UK LLP is regarded as a ’corporate body ‘in legal terms, the same as a company. For tax purposes a UK LLP is normally treated as a ’partnership’. It means that a UK LLP will normally be regarded as transparent for tax purposes and each member/partner will be subject to tax on their share of the LLP’s income or gains. It means that if an UK LLP carries on a trade, each registered partner is taxable on its own income they derive from the LLP as trading income.

Although UK LLP requires a minimum of two members, there is no restrictions on you to be the owner through two offshore company members, or one member as an individual and the other as a company, to form an LLP.

LLP vs LTD Tax and Legal Comparison Table

 Limited Liability PartnershipLimited Company
Regulations LLP Act 2000 Companies Act 1985
Capital No regulations, no shares No minimum capital contribution requirement Minimum share capital for Ltd is 1p (recommended £1,000)
Management and running of the business and profits extraction Minimum two members (individuals or companies)
  1. No secretary needed, but a designated member carried out compliance duties.
  2. No requirements for meetings
  3. Profits are distributed as per LLP Agreement.
  1. Only one director Secretary appointment is not required but is strongly advisable for Ltd company to carry on the duties, which otherwise lie with a Director.
  2. Requirements for meetings and AGM (Annual General Meeting)
  3. May withdraw earnings through dividends
Liability Limited by the amount of capital contributed.
Professional negligence of a member may result in a personal liability
Limited by shares
  1. Partnership Agreements are not available to general public
  2. Accounts and Annual return must be filed together with various other returns
  1. Shareholders details and profit share is available to general public
  2. Same as UK LLP
Small companies have abbreviated accounts
Record Keeping LLP’s are not required to hold, maintain and record details of the Members meetings UK Ltd Company is required to hold, maintain and record details of the Shareholders/Directors meetings.
Withdrawal of Profits Members of LLP vs Ltd UK are not restricted to withdraw profits from LLP when there are insufficient accumulated profits, as there are no ‘capital maintenance’ rules for LLP’s Shareholders of UK Limited Company are restricted to withdraw profits from when there are insufficient accumulated profits due to ‘capital maintenance’ rules.