An informative article outlining the key differences between a Private Limited Company and a Limited Liability Partnership, alongside the respective advantages and disadvantages of each.

1. WHAT ARE THE DIFFERENCES BETWEEN A
PRIVATE LIMITED COMPANY (LTD) AND A
LIMITED LIABILITY PARTNERSHIP (LLP)?

2. 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.

3. 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.

4. 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.

5. 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.

6. 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

7. 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.

8. 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.

9. 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.

10. W: http://www.wisteriaformations.co.uk
@: formations@wisteria.co.uk
T: +44 (0)844 893 0808
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