Starting a new business can be a challenging time for entrepreneurs. Even choosing the type of business you want to set up can be just as demanding. If you are having difficulty choosing between setting up a limited company or a Limited Liability Partnership (LLP), we can help you with this process at Fast Form Online.
It is important to recognise what may work for one business may not work for another. So, let’s explain the differences between the two below.
What is a limited company?
A limited company is a business which is separate from its owners. This means the owners are responsible for any financial debts the business may incur. Private limited companies are limited by shares or by guarantee. This means that the shares and profits are divided to each shareholder which reflects on the value of shares they own. They can also sell their shares in exchange for capital investment. However, a limited company, will have to pay Corporation Tax and Capital Gains Tax on all taxable profit and the directors may also need to submit a Self-Assessment tax return.
Why should I choose a limited company
This type of business would be ideal new businesses who plan to sell shares in return for capital investment. This would also be better suited for a non-profit company as it is not possible to create a non-profit limited liability partnership.
What is a Limited Liability Partnership
A limited liability partnership is a type of business where some or all of the partners have limited liabilities. This was introduced in 2001 and is useful for organisations which operate as a partnership such as accountancy firms or solicitors.
This type of business is similar to a normal partnership. However, each partner is not held responsible for someone else’s financial misconduct or negligence. Furthermore, the liability each partner has is limited to a certain amount which they all agree to pay, should the business run into any financial difficulties. This is then documented into a partnership agreement which highlights everyone’s responsibilities.
For this type of business, they must have at least two partners as designated members but there is currently no limit on how many there can be.
Their duties include:
• Filing annual accounts and confirmation statements
• Registering the LLP for Self-Assessment and VAT if applicable
• Reporting any changes to HMRC and Companies House where necessary
• Maintaining accounts or appointing an accountant
• Representing the LLP in any legal matters
• Making sure the LLP is adhering to all forms of statutory compliance
Why should I choose a Limited Liability Partnership?
This type of business is more suitable for those who decide to go into business with other people. By forming an LLP, members can protect their own assets. This means they will only lose the money they have invested in the partnership. However, if you want more flexibility in your internal business structure, then an LLP is more beneficial. This allows you to change it by adding or removing members.
Get your limited company registered today with Fast Form Online