Limited Liability Partnership
Choosing a Business Form
Your May Want to Consider
The UK Limited Liability Partnership
One of the Newest Entity Options
For Your Tax Exempted Offshore Transactions
Provide Your Worldwide Trading
With the Highest Credibility
The Limited Liability Partnerships Act of 2000 created for the first time a British version of the American limited liability company (LLC). Like its America cousin it is governed by an Operating or Limited Liability Partnership Agreement and can be structured in a way to allow non-UK resident individuals, conducting all their business outside of the UK to enjoy the prestige of a genuine British entity without liability to UK taxes. However, it is important to note that tax consequences may be created in the jurisdiction of management and control and/or the fiscal residence of the beneficial owners depending on double taxation treaties and the specific drafting of the Partnership Agreement.
The tax authorities in the United Kingdom have confirmed that the taxation base of a limited liability partnership will follow the procedure operated in the past for partnerships. The Limited Liability Partnership itself will not be liable for taxation on profits arising within the partnership, but the profits will be assessed to tax separately on the individual partners.
A limited liability partnership must be a commercial venture operating for profit. Changes in the tax rules are anticipated to confirm that operation through a limited liability partnership by a charity or in relation to investment in shares or property will not be allowed.
The advantages of operating in this way are that no personal liability falls on a member of a limited liability partnership for the contracts or debts of the limited liability partnership and there is no joint or several liability for the negligence of any other member. The organisation of a limited liability partnership may well, therefore, be a popular vehicle for future use by the professions in the United Kingdom and for international business operated by non-resident partners outside of the United Kingdom. There may well be taxation advantages to be obtained from this route, where multi-national business is being undertaken by an international of partners.
Tax Planning Credentials
Subject to the use of the correct structure and that there are no UK activities or ultimate UK beneficial owners it seems that the Inland Revenue will not seek UK tax at either a corporate or individual level.
If a United Kingdom LLP Has Only Non-Resident Partners & No UK Business, It Will Not Be Taxed In The United Kingdom
There is no requirement for a UK LLP to have a United Kingdom partner. As explained below no taxation should arise on non-resident partners on income from a UK LLP where the business of that United Kingdom LLP is managed, controlled and carried out outside the United Kingdom.
How Is A United Kingdom LLP Taxed?
The explanatory notes to the first draft of the UK LLP Bill stated that the treatment of an LLP as a partnership and members as partners will apply for all tax purposes. Section 10 of the LLP Act states that where an LLP carries on a “business with a view to profit” the members will be treated for the purposes of income tax, corporation tax and capital gains tax as if they were partners. Section 125 of the 1995 Finance Act has the effect of restricting the charge to tax on a non-resident partner of a United Kingdom partnership to its share of the profits of the business carried out in the UK where the partnership business is carried out partly in the UK and partly abroad.
From this we can see that where a non-resident partner receives profits from a UK LLP in relation to a business that is carried out wholly outside the United Kingdom, no UK income tax or corporation tax should arise.
Can A United Kingdom LLP Be Used For Investment Business Or Property Holding?
The Inland Revenue Tax Bulletin Issue 50 confirmed that a UK LLP carrying out a trade or profession will be treated as a partnership for tax purposes. They also state that the guidance does not cover the tax treatment of investment business or property holding for which the LLP structure was not originally intended. Therefore we do not recommend that a United Kingdom LLP be used for investment business until it is clear how the UK Revenue intends to tax such ventures.
Does A UK LLP Require an Audit?
The members of an LLP are obliged to prepare for each financial year of the LLP a balance sheet and profit and loss account. These accounts, together with a copy of the auditor’s report on them, must be delivered to the Registrar of Companies. An LLP that is regarded as small would be exempt from this audit requirement. To qualify as a small LLP there must be gross assets of no more than £ 1.4m and turnover must not exceed £ 1m. In addition the LLP must not be part of a where a Public Company is a member or where the is not small. It should be noted that the partners are still required to prepare and file true and fair accounts.
United Kingdom Limited Liability Partnership Benefits
General LLP Beneficts
– The United Kingdom is actively pro-business and is relatively free of bureaucracy;
– A virtual office presence can be established in London to give the impression of being a domestic LLP;
– The Certificate of Formation, Articles of Organization (if applicable) and the LLC Agreement are remarkably flexible;
– All legal documents supplied from the appropriate division of corporations can be quickly apostilled pursuant to the Hague Convention of 1961;
– Highly respectable and credible jurisdiction;
– Full range of services office address options;
– UK LLP’s can be registered in as little as 7 working days (if expedited);
– Well-educated population;
– Highly developed corporate and general law;
– Prestige of having a UK registered entity;
– Low annual Companies House Duties;
– Fiscal transparency for both domestic and non-resident LLP’s;
– Ability of non-resident LLP’s to be externally managed in low tax, tax-free or tax exempted jurisdictions.
Incorporation is a very simple process, which we have tailored to provide an easy route to completion of the necessary formalities. Once you are happy with your decision that an LLP is the correct vehicle for your business venture, simply contact our limited liability partnership formation agents! The success of your business is our vision! NEED HELP? PLEASE CALL OUR HELPLINE + 44 (0) 207 900 1845. Let us help you take the most important first step in turning your great business idea into a reality. At TBA INCORPORATORS we shall provide you a tailored LLP incorporation designed to provide you choice and flexibility in your partnership formation.
We offer a range of options to help you lodge your LLP at Companies House quickly and easily and ensure you can administer it with the minimum of fuss once it is registered. Of all the legislation of the last few years, the “creation” of limited liability partnerships is one of the most interesting. The essence of a limited liability partnership for practical purposes is as a vehicle to contain a partnership of any size where partners may be at risk from the careless or accidental negligence of a colleague. For example, partners in International accountancy firms would be protected from personal liability if a claim was successfully pursued by a major client. Partners in a construction business would be protected if a new building collapsed, causing high level claims against them. Other partnerships may be tempted to use a limited liability partnership for the same reason. A limited liability partnership may also be appropriate for a partnership where some partners are not actively involved. They might have once been called “sleeping” partners. This structure will be suitable for a of people engaging together in a property or finance venture.
A limited liability partnership is unlikely to be useful for a small trading company of any sort because a conventional limited company is likely to perform an appropriate role at less cost.
At TBA INCORPORATORS we provide one of the highest rated LLP incorporation services to our clients around the world, particularly for UK residents. Our expertise ranges from local to international affairs, thus giving our clients an edge over others in accessing the international market. We provide complete limited liability partnership formation solutions for new and existing businesses, including legal affairs pertaining to their business, whatever the intended form or mode of operation.
We believe that all our clients deserve the best service we can offer, so unlike most other company formation agents, we offer just one level of service – the best! We are not the cheapest provider of company formations but we do provide excellent value for money at affordable prices, without cutting corners and with no hidden extras.