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English partnerships are understood as partnerships registered by the Registrar of Companies for England and Wales, and having their registered office address in England.
There are two most common types of partnerships in England which are widely used in international business – LLP and LP. Despite the similar principles of taxation, these legal forms are quite different.
|English LLP||English LP|
|Legal form||Limited Liability Partnership (LLP) combines the advantages of a traditional partnership and a limited company.||Limited Partnership (LP) is a traditional partnership with limited liability.|
|Legal personality||LLP is a separate legal entity and is liable for its obligations.||LP registered in England is not a separate legal entity, however it has some its features – firm name, registration number, principal place of business (address for official correspondence). Being a business vehicle, a LP may enter into transactions, open bank accounts.|
|Capacity||A partnership may conduct any lawful business (including sale of goods, rendering services etc.).|
|Status of partners|| Members (partners) in LLP have equal status.
Minimum number of members is 2 (individuals or legal entities of any nationality or residence).
Fulfilment of statutory requirements for LLPs is vested in designated members.
|Any natural person or legal entity irrespective to residence or citizenship may be a partner in LP.
Limited Partnership consists of 1 (or more) general partners who exercise its management, and 1 (or more) limited partners who made a contribution into partnership’s capital (by means of money or other property with monetary evaluation).
|Partners’ liability for partnership’s debts||The liability of all members is limited to the amount of their contributions.||The general partner is liable for all debts and obligations of the partnership.
The limited partner’s liability is limited to the amount of contribution he made.
|Management||LLP has no directors and secretaries.
Management responsibilities are distributed between members.
A member may be appointed as a managing partner. Other persons may be authorized to act on behalf of LLP by power of attorney.
|LP has no directors and secretaries.
General partner exercises management and enters into transactions on behalf of LP (as well as other persons authorized by the partnership by power of attorney).
|Taxation principles||‘Tax transparency’: LLP is not subject to tax as a separate taxpayer and does not pay corporate tax in the UK.
However, the members of LLP are subject to taxation in respect of income received by each of them individually as a result of participation in the partnership. The income of members may be taxed in accordance with the laws of the country or countries of their residence.
|‘Tax transparency’: LP itself is not subject to taxation in the UK.
LP’s profit is distributed between its partners who must pay taxes in the country of their tax residence.
|Taxation of partnerships with non-UK resident partners||If the members of LLP are the companies registered in tax-free zones (offshore jurisdictions) and LLP does not receive income from sources in the UK, the income of such partnership is taxed neither in the UK nor in the place of incorporation of partners. LLP in this case appears to be a tax-free tool.||Legal entities incorporated in offshore jurisdictions may be the partners in a LP. Provided that there is no activities and source of income in the UK, it may result in complete absence of taxation of LP in the UK.|
|Duties to prepare and file annual accounts||LLPs must file annual return and financial statements with Companies House.||LPs must prepare annual accounts, but in case if a general partner is a foreign (not British) company, filing of the accounts with Companies House is not required.|
|Duty to file tax return||LLP and its members must file annual tax returns.||LP and each of its partners must file annual tax returns.|
|Duty to disclose information on people with significant control (PSC)||LLP must maintain register of their ‘people with significant control’ (beneficiaries) and deliver this information to Companies House. The information on beneficiaries of LLPs is publicly available on the Companies House website.||English LPs (as distinct from Scottish LPs) have no obligation to deliver the information on their ‘people with significant control’ (beneficiaries) to Companies House.|