A Limited Company is a business that is completely separate from its owners. This means that the owners are only responsible for business debts up to the value of their investments or guarantees to the company.
A Limited Liability Partnership (LLP) is a partnership where some or all of company’s partners have limited liabilities. An LLP is useful for professionals who usually form traditional partnerships such as surveyors, doctors or solicitors.
Limited Company
In the UK, a Limited Company must be registered at Companies House. This bestows the Business with the status of being a separate ‘legal person’ from the people who run it, and also provides a unique company registration number to the Business.
There are a number of advantages in setting up your business as a Limited Company rather than a general partnership or Sole Trader. One of the main benefits is limited liability afforded to the owners where company and personal finances are kept separate. This means that should the Company fail, the Company’s directors and share holders have limited liability afforded to them in that, unless wrong doing is proven, their own personal assets cannot normally be seized, unlike Sole Traders.
A Limited Company can assist in giving an overview of credibility and prestige to your business. It can help make you look more professional to prospective Clients or Investors, potentially giving you wider options should you be looking to raise additional capital. A Limited Company can also often provide greater Tax efficiency when compared to other Business models.
Limited Liability Partnership
Setting up as a partnership is a good idea if you’re planning to go into business with other people - you can set up a Limited Liability Partnership (LLP) to run a business with 2 or more members. The key point to consider is that an LLP as an entity is not taxable, but the individual members are. As a result, LLP’s don’t pay Corporation Tax. Instead untaxed profits are distributed to the members who, for tax purposes, are treated as self-employed individuals and are therefore liable to pay any resultant tax liability themselves.
Members must also register with HMRC for Self Assessment and pay Income Tax and NIC on their individual profits, regardless of whether they take all of this income as a salary or reinvest back into the business.
An LLP is a separate legal entity and, while the LLP itself is liable for the full extent of its assets, by entering into a LLP members get to protect their private assets. If the business should fail, and it’s not down to their mistakes, then members would only lose the value of their investments or guarantees to the partnership.
Should you want flexibility to your internal business structure then a LLP can be more beneficial as you can change it by adding or removing members whenever you want. The structure of a limited company in comparison can be more rigid.
Does this all sound rather confusing?
We can help
Barnstone Accountancy has successfully helped many Businesses to set up trading and as such we can confidently provide you with as much or as little assistance as you require.
Whether you need advice on which type of business model best suits your needs or you know which route you want to take but you’re not sure how to achieve it, Barnstone can guide you through the process, doing as much or as little as you want us to do.
You can choose to leave us to set everything up for you by selecting our New Business Start-up Service or we can be available to help you across any difficult hurdles should you need our assistance. You decide what best suits you and we will be there to guide you.
If you would like further information regarding setting up your Business then please feel free to contact us by either pressing the “Contact Us” button or via the contact details listed below.
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