LLP vs LTD in UK: What’s the difference ?
The advantages of setting up an offshore company in the UK are pretty obvious: a stable developed economy, international prestige and a loyal tax system, with the skillful manipulation of which you can be free of a large number of taxes!
But what would suit your interest best? Is there any serious difference between opening an LLP and an Ltd in Britain?
Well, an LTD is a private limited company that’s completely separate from its owner. The owner can sell shares for profit and pay dividends to investors. Legally speaking, it must have a director, a shareholder and a secretary. Furthermore, one of the managing directors must be an individual. Still, you don’t actually need any fellows to open a limited company, just yourself — you can be both director and sole shareholder.
LLP may be your halfway point between a traditional partnership and a private limited company. It implies that two or more equal partners have to create a legal entity. They can be individuals or companies that earn money and pay their taxes separately. Here, the partners can independently decide how they distribute the profits. Opening an LLP also requires the presence of a registered office in the UK.
Now, let’s delve deeper into the whole corporate tax thing. Every business has to pay something if it has gained any income during a particular year. In Britain, the corporate tax rate in 2020 is 19%. Ltds pay corporate tax, regardless of the source of the profit (the UK or abroad). LLPs do not pay corporate tax, even if they operate within the UK. The main disadvantage of an LLP is that it can be less tax efficient if you’re going to employ lots of people. The LLP income is personal income and will be taxed respectively. That’s why the tax can be higher than you’d pay as an Ltd company and so the profits won’t be retained the same way.
Moreover, Ltds are less covered by laws, being regulated only by the The Companies Act of 2006, while LLPs are amenable to the Limited Liability Partnership Act of 2000, the Limited Liability Partnerships Regulations of 2001 and The Companies Act of 2006.
What happens if you go bust?
When you open up your LLP, you and your pals have to agree on each person’s individual liability. That means that if the business goes bankrupt, you won’t be responsible for all the company’s debts — only what you agreed at the beginning. Having an Ltd means that if things go horribly wrong, you might only lose the value of your shares (and not your house or all the kids’ college savings).
Long story short, if you decide to start an offshore Ltd, you’ll pay taxes on the income you make, and you’ll be able to sell shares in your company. The dividends you get will depend on the shares you own, as will your liability if something goes bananas.
If you want to open up an LLP, you can’t sell shares in your company. Still, you can easily change the way you and your partners get your own income.
Still not sure what to choose? Let Bizonaire free you from all these mind blowing details and help you easily make money in the UK!
