Limited companies and LLPs share many similarities, most notably the reduced financial responsibility of the owners. However, they do have significant differences as well, namely:
All taxable income generated by a limited company is subject to corporation tax at 20%. Any salary a director receives will be liable for income tax, National Insurance and employers’ NI contributions. However, directors are often also shareholders. This means they are treated as employees of their own company. The distribution of profits to directors can be done in such a way that much of the money they receive is not subject to corporation tax or personal income tax.
A limited liability partnership (LLP) is a separate legal business structure that, at one and the same time, grants the benefits of limited liability while allowing the partnership's members to enjoy the flexibility of structuring the business as a partnership in the traditional sense. LLPs are intended for those businesses that carry on a profession or trade.
Just two LLP members are required to be held liable for filing LLP accounts and other secretarial duties.
If the LLP's members are not resident in the UK and the income of the LLP is derived from a non-UK source, then neither the LLP nor its members will be subject to UK taxation. So LLPs in the UK bring together a number of benefits.
Consequently, an LLP in the UK is characterised by being a very flexible body for trade in the international market place which, if structured correctly, can escape being subject to taxation in the UK.
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