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UK LLP Formation – Advantages for Non-UK Residents

UK LLP (Limited Liability Partnership) Formation

Limited Liability Partnerships were first introduced to UK and non UK residents in 2001. UK Limited Liability Partnership formation made available as a business structure the management flexibility found in a traditional partnership and the liability protection offered by a limited company; which was at the time, found only in the structure of Limited companies.

One of the LLP advantages for non-residents is that Limited Liability Partnership incorporation is not restricted to UK residents only. It means that Limited Liability Partnership registration is available to non-residents as members.

UK LLP Advantages — Legal Framework

LLP in the United Kingdom is regarded as a corporate body, like a company, the LLP has a ‘personality’ with its own identity and can open bank accounts, acquire property, and invest in its name as a Limited Liability Partnership.

Following LLP registration, a LLP is as a rule treated as a ’partnership’ for tax purposes. It means that a LLP in the UK will normally be regarded as transparent for tax purposes and each member will be subject to personal income tax on their share of the UK LLP’s income or gains. A partner in a Limited Liability Partnership that carries on a trade is taxable on its own income they derive from the LLP as trading income.

UK LLP Registration Advantages

Limited Liability Partnership formation is a very simple way to protect your personal assets. The LLP structure, as well as the limited liability company, does not tie your personal assets to the company (as happens in a sole trader or partnership business). The members of the UK LLP can limit their personal liability, similar to how shareholders do in a limited company.

The liability of the members of a Limited Liability Partnerships is based on the value of the personal capital contributions or guarantees they have made for the LLP.

UK Limited Liability Partnership Formation

A LLP formation can be set out with a minimum of two or more people. There must always be at least two members (partners) for LLP registration; however, new members to the LLP can be easily admitted by filing a notification form at Companies House.

UK LLP Formation — Governance and Constitution

We recommend the LLP partners (members) prepare and sign a partnership agreement amongst them to agree on profit sharing, management or other arrangements otherwise verbally contracted between the members. An operating agreement is not necessary and the UK LLP does not file any form of constitution.

LLP advantages for non-residents offer the business flexibility and the ability to separate out different rights for different members even after incorporation. Different percentage of voting can be given to certain classes of members such as new members, retiring members, etc. as compared to income rights. All these matters can be comfortably accommodated in the UK LLP members’ agreement.

UK Limited Liability Partnership — Reporting and Taxes

The LLP must file financial statements at Companies House. LLP financial statements for small businesses can be abbreviated, to prevent commercial information to be publically available. The tax rules for a LLP in UK are the same as an ordinary UK partnership in which the members are self-employed. After LLP formation, the LLP files an abbreviated annual tax return, but each LLP partner reports their share of the profit on their personal tax return.

Unlike a limited corporation there are no tax charges on changing the profit sharing arrangements in a LLP. The members of an LLP can review and revise the arrangements for profit sharing as often as needed.

The main advantages of LLP for non-residents is that the UK LLP is not subject to Corporation Tax and LLP members only pay personal income tax based on their residence and where the trade takes place (outside or in the UK).

UK Limited Liability Partnership Incorporation Advantages

While UK LLP registration requires at least two members, the LLP incorporation can be done with two corporate (offshore company) members, or one member as an individual and the other as an offshore company. We will only provide UK LLP incorporation with corporate members being offshore companies, if the incorporation of the offshore companies has been done though our partners. This is because we have to know our customers and the Beneficial Owners of the business located overseas.

by Elena Genovese