What are the differences between a Private Limited Company and a Limited Liability Partnership?
WHAT ARE THE DIFFERENCES BETWEEN APRIVATE LIMITED COMPANY (LTD) AND ALIMITED LIABILITY PARTNERSHIP (LLP)?
WHAT IS A PRIVATE LIMITED COMPANY (LTD)? Most common incorporated business structure. Owned by shareholders and managed by directors. Private Limited Companies provide limited liability to its members because the company has a separate legal identity to its shareholders and directors. Shareholders have no personal liability beyond the amount they originally paid for their shares. Shares cannot be offered to the public. Recognised by having “Limited” or “Ltd” at the end of their company name.
ADVANTAGES OF INCORPORATING A LTD Private Limited Companies have are a separate legal entity from their owners, therefore the owners have no personal liability for the debts of the company. As Limited Companies are legally registered and regulated, this portrays a prestigious and professional image to your consumers. You may find it easier to obtain credit from banks with a Ltd corporate structure. Ltd companies are able to raise funds as a result of issuing shares privately. Tax advantages gained through effective tax planning – as dividends are taxed at a lower rate than income. It would probably be easier to sell a Limited Company rather than a sole trader company.
DISADVANTAGES OF INCORPORATING A LTD Less privacy as a result of your company details being publically available on the Companies House database. Costs of hiring an accountant are typically more costly for a Limited Company than a sole trader. Ltd companies must submit annual accounts and an annual return to Companies House, otherwise they will incur a penalty or be struck off the register of companies.
WHAT IS A LIMITED LIABILITY PARTNERSHIP (LLP)? LLPs also have a separate legal personality. LLPs must have at least two members. The LLP is liable for the full extent of its assets. An LLP is managed by all of its members. LLPs must prepare and file annual accounts and an annual return to Companies House. Members are entitled to an equal share of the company’s capital and profits.
ADVANTAGES OF INCORPORATING A LLP LLPs were formally established in 2000. Midway between a partnership (business liability) and a corporation (business security). Flexible management structure which can be decided within a Partnership Agreement that is not made publically available
DISADVANTAGES OF INCORPORATING A LLP It can be more difficult to gain funding – unable to raise capital by issuing and selling new shares. You are unable to leave a LLP dormant, therefore you cannot reserve your company name for a future project through dormancy. There is no legal requirement to have a Partnership Agreement and if the LLP does not have one governing internal relationships, issues could arise.
SIMILARITIES BETWEEN LTD AND LLP Both have a separate legal identity to the directors. Both allow limited liability to the amount directors and/or members originally paid for their shares, so less risk associated. The company itself is liable for its assets.
HOW DO I FORM A PRIVATE LIMITED COMPANY? Within the UK, there are 3 procedures through which to incorporate a Ltd company:1) Companies House – you are required to fill in the relevant forms with limited support.2) By means of a Lawyer or an Accountant – most expensive method.1) By means of a specialised Company Formations Agent – for instance Wisteria Formations.
W: http://www.wisteriaformations.co.uk@: firstname.lastname@example.orgT: +44 (0)844 893 0808A BIT ABOUT WISTERIA FORMATIONS...UK Company Incorporation for £24.99.Easy 10-step application process online.Free business bank account referral with HSBC or Barclays.Free consultation with a Chartered Accountant or CharteredTax Adviser to get your business off to the best start!