An LLP is essentially a hybrid between a partnership and a limited company which operates under a combination of the Limited Liability Partnership Act 2000 and the Companies Act 2006. It allows business partnerships to enjoy the benefits of Limited Liability, avoiding the problems of joint and several liabilities that apply to ordinary partnerships.
LLP formations have relatively few compliancy requirements and possess many added benefits when compared to conventional companies. Some of the requirements and benefits are listed below.
The main requirements of a LLP are as follows:
- Minimum of two members required.
- Of the members there must be a minimum of two designated members.
- A registered UK office.
- Accounting records must be maintained.
- Annual accounts and returns must be submitted to the Registrar.
- Although not subject to taxation itself, a LLP must file an annual informational tax return.
- A LLP must be a commercial venture operating for profit.
There are a number of advantages of a LLP, some of which are listed below:
- All the members enjoy limited liability.
- The liability of the members is limited to the investment in the partnership.
- Unlike other companies which must only trade within the objects stated in the M&AA a LLP has unlimited capacity.
- An LLP provides a for a more flexible management structure.
- An LLP is transparent for tax purposes with members being taxed individually on their share of the limited liability partnerships income or gains.
Private Limited Companies are governed by the Companies Act 1985. A Private Limited Company is a legal entity in its own right; separate from those who run it, the Shareholders.
The limited liability, potential tax advantages and simplicity in running a private limited company make it the most common form of registered business in the UK. A Shareholders personal assets remain separate (unless they are secured against the business for borrowing) and your risk is reduced to only the money you have invested in the company and any shares you hold which you have not paid for.
There is no minimum capital requirement for a Private Limited Company. Private Limited Companies are required to have a minimum authorised share capital of £1 (or its currency equivalent) and are formed with both authorised and issued share capital. The minimum issued capital is one share but additional capital is usually issued to reflect the stability of the company. Unissued shares can be issued at any time by the Directors, subject to prior approval from the Shareholders. Shares in a Private Limited Company are transferred by private agreement between the seller and the buyer.
UK Limited Companies have very few restrictions or requirements which makes them a simple yet flexible solution for many businesses.
The main requirements of a Private Limited Company are as follows:
- A registered office is required.
- One Director is required, the Director does not need to reside in the UK.
- At least one Director must be an individual.
- A Company Secretary is optional however it is advised to appoint a secretary at the registered office so all requirements can be easily fulfilled.
There are a number of advantages associated with a Private Limited Company. Some of these are as follows:
- Limitation of Liability: This is the main advantage of a Private Limited Company. The company is a separate corporate body from the individual and liability for payment of the debt stops with the company.
- Profit Distribution: Profits made by the company can be distributed to theShareholders in the form of dividends.
- Ownership & Control: Private Limited Companies are flexible in their control and ownership and decisions can be made quickly and easily.
- Separate Entity & Succession: Being a separate entity a Private Limited Company can benefit from continued existence and ownership can be easily transferred to another person.
- Flexibility of Objectives: Because Private Limited Companies do not have to set the objectives for their business in the Memorandum of Association this leaves companies free to operate in many areas and markets.