Company formation in the United Kingdom
The United Kingdom
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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 partnerships are understood to be partnerships registered with the Registrar of Companies for England and Wales and having their registered office address in England or Wales.

The two most common types of partnerships in England that are widely used in international business are a limited liability partnership, abbreviated as an LLP, and a limited partnership, abbreviated as an LP. Despite their similar liabilities for taxation the legal form of each of these kinds of partnership is quite different.

English LLPEnglish LP

Duty to disclose information about people with significant control (PSC)

An LLP must maintain a register of their “people with significant control” (beneficiaries) and supply this information to Companies House. Information about 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 about their “people with significant control” (beneficiaries) to Companies House.

Legal form

A Limited Liability Partnership (LLP) combines the advantages of a traditional partnership with those of a limited company (LTD).

A Limited Partnership (LP) is a traditional partnership with limited liability.

Applicable statute

  • Limited Liability Partnerships Act 2000;
  • Companies Act 2006.
  • Limited Partnerships Act 1907;
  • Partnership Act 1890.

Legal personality

An LLP is a separate legal entity and is liable for its obligations.

An LP registered in England – or in England & Wales – is not a separate legal entity, even though it has some of its features such as a name for the firm, a registration number and a principal place of business i.e. an address for official correspondence. Being a business vehicle, a LP may enter into transactions and open bank accounts.

Capacity

A partnership may conduct any lawful business including the sale of goods, the rendering services etc.

Status of partners

The members of – i.e. partners in – an LLP have equal status.

The 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 may be a partner in an LP irrespective of residence or citizenship.

A Limited Partnership consists of one or more general partner or partners, who exercise its management, and one or more limited partner or partners who has-or-have contributed to the partnership’s capital, in the form of money and/or other property or assets with monetary value.

Partners’ liability for partnership’s debts

The liability of the members is limited to the value of their contributions.

The general partner/s is/are liable for all of the partnership’s debts and obligations.

The limited partner or partners are liable only up to value that s/he or they have contributed.

Management

An LLP has no directors and or secretaries.

Management responsibilities are distributed between members.

A member may be appointed as a managing partner. Other persons may be authorised to act on behalf of the LLP by power of attorney.

An LP has no directors or secretaries.

The general partner exercises management and enters into transactions on behalf of the LP (although these functions can be executed also by other persons whom the partnership has authorised to do so through power of attorney).

Taxation principles

“Tax transparency”: An LLP is not subject to tax as a separate taxpayer and does not pay corporate tax in the UK.

The members of an LLP are subject, however, to taxation in respect of income received by each of them individually as a result of participation in the partnership, on which they may be taxed in accordance with the laws of their country or countries of residence.

“Tax transparency”: An LP is not itself subject to taxation in the UK.            

An 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, i.e. partners, of an LLP are companies registered in tax-free zones (such as offshore jurisdictions) and the LLP receives no income from sources in the UK, then the income of such a partnership is taxed neither in the UK nor in the place of incorporation of partners. In this case the LLP is, in effect, a tax-free vehicle.

Legal entities incorporated in offshore jurisdictions may be partners in an LP. Provided that there are no activities or sources of income from within the UK then the LP may have no UK tax liability.

Duties to prepare and file annual accounts

An LLP must file an annual return and financial statements with Companies House.

An LP must prepare annual accounts but, where a general partner is a foreign company, i.e. it is not British, it is not required to file these accounts with Companies House.

Duty to file tax return

An LLP and its members must file annual tax returns.

An LP and each of its partners must file annual tax returns.

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