From the get-go, setting up a company has a confusing obstacle to overcome: What type of company am I setting up? Two options at hand are a Limited Liability Partnership, and a Limited company. These similar sounding terms can be confusing to differentiate and often leaves new entrepreneurs reaching for paracetamols.
What is a Limited Liability Partnership?
Termed in 2001, a Limited Liability Partnership is a partnership between different organizations in which responsibilities are limited fairly. Whereas the organizations are mutually responsible for their correct taxation and payment, It removes each partner’s responsibility from any misconduct and negligence by the others partners. This benefits everyone by providing a safety blanket against any damaging mis practice by the people they collaborate with. Non-profit organizations are not able to use this legal structure.
What is a Limited Company?
Limited Companies are those where their owners are separated from them. In these instances, the owners are only liable for company debts up to a specific value determined by their guarantees to the company or their investments. These companies are limited through shares; depending on the value of an individual’s shares in a limited company, they will receive profits to their share value. I other words, all shareholders will receive a distribution of profits determined by their shares’ worth.
How Do They Differ?
These two companies differ in many aspects, including:
- LLP needs a minimum of two people to set up the company while a LC only requires one person.
- LLPs must register VAT if their taxation turnover exceeds eighty-four thousand pounds. In comparison, LCs must pay Capital Gains Tax as well as Corporation Tax. This means each member of LLP must register separately as self-employed.
- LLP’s do not have shareholders whereas shareholders can sell shares for investment in LCs
If you need help with LLP or company formation please contact The Accountancy Solutions on 01216297768 or 02070784001 for further advice.