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E-Quick Package |
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 £ 42.00 | No Annual Fees! | | |
 This is our most popular package with UK residents, and includes:
 The registration of your private flat management company from scratch using your own registered office address, and appoint your own candidates to the roles of director, secretary (if needed), and shareholder;
The standard capital on formation is £1,000, this is divided into 1,000 ordinary shares valued at £1.00 each (it is not required to have all of the shares issued, but a minimum of one share must be issued);
The formation of a flat management company usually takes as little as four to six hours from the time that your application and payment are received by Coddan;
The government fee for incorporation is included in the price of this package;
The following documents, which need to be printed and signed, will be emailed to you upon formation of your company: A certificate of incorporation (requires PDF file reader);
A specially drafted memorandum and articles of association, which is required for UK companies which have business activities involving property and flats management (requires MS-Word file reader);
The first meeting of the board of directors (requires MS-Word file reader);
Share certificates and a company register.
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Economy Package |
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| £ 92.00 | Annual Maintenance Fee £50.00 | | |
This is our most popular package with EU residents, and includes: The registration your flat management company from scratch using one of our registered office addresses, and appoint your own candidates to the roles of director, secretary (if needed), and shareholder;
The standard capital on formation is £1,000, this is divided into 1,000 ordinary shares valued at £1.00 each (it is not required to have all of the shares issued, but a minimum of one share must be issued);
The formation of a flat management company usually takes as little as four to six hours from the time that your application and payment are received by Coddan;
The government fee for incorporation is included in the price of this package;
 The provision of a registered office address for 12 months is also included in the price of this package (our registered office address service is charged annually);
The following documents, which need to be printed and signed, will be emailed to you upon formation of your company: A certificate of incorporation (requires PDF file reader);
A specially drafted memorandum and articles of association, which is required for UK companies which have business activities involving property and flats management (requires MS-Word file reader);
The first meeting of the board of directors (requires MS-Word file reader);
Share certificates and a company register.
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Premier Package |
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| £ 141.95 | Annual Maintenance Fee £99.95 | | |
This is another one very popular package for small and medium size businesses, such as those being run by a sole director from home, and for companies owned by overseas residents who still need a local registered office address but would rather not open local offices; This package is often chosen by such customers, who are looking to minimise a sole director personal liability (and who are not quite familiar with the new UK corporate legislation), because this package includes a provision of a nominee secretary for 12 months. This package is also includes: The registration your property management company from scratch using one of our registered office addresses, and appoint your own candidates to the roles of director, and shareholder;
The standard capital on formation is £1,000, this is divided into 1,000 ordinary shares valued at £1.00 each (it is not required to have all of the shares issued, but a minimum of one share must be issued);
The formation of a property management company usually takes as little as four to six hours from the time that your application and payment are received by Coddan;
The government fee for incorporation is included in the price of this package;
The provision of a registered office address for 12 months is included in the price of this package (our registered office address service is charged annually);
The provision of a nominee secretary for 12 months is also included in the price of this package (our nominee secretary service is charged annually); The following hard bound copy of corporate documents, will be posted to you upon formation of your company: A laminated copy of the certificate of incorporation of your company;
A hard bound copy of the specially drafted memorandum and articles of association, which is required for UK companies which have business activities involving property and flats management;
A hard bound copy of the minutes of the first meeting of directors;
Share certificates, and your company register.
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Deluxe Package |
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| £ 266.95 | Annual Maintenance Fee £224.95 | | |
The Deluxe business start-up package is our most popular package with international customers, and includes: Incorporation of your property management company from scratch using one of our registered office addresses, our nominee director and our nominee secretary, we will appoint your own candidate(s) to the role of shareholder;
The standard capital on formation is £1,000, this is divided into 1,000 ordinary shares valued at £1.00 each (it is not required to have all of the shares issued, but a minimum of one share must be issued);
The formation of a property management company usually takes as little as four to six hours from the time that your application and payment are received by Coddan;
The government fee for incorporation is included in the price of this package;
The provision of a registered office address for 12 months is included in the price of this package (our registered office address service is charged annually);
The provision of a nominee secretary for 12 months is included in the price of this package (our nominee secretary service is charged annually);
The provision of a nominee director for 12 months is also included in the price of this package (our nominee director service is charged annually); The following two hard bound copies of corporate documents, will be posted to you upon formation of your company: A laminated copy of the certificate of incorporation of your company;
A hard bound copy of the specially drafted memorandum and articles of association, which is required for UK companies which have business activities involving property and flats management;
A hard bound copy of the minutes of the first meeting of directors;
Share certificates, and your company register;
The general power of attorney signed by nominee director;
Pre-signed, undated resignation letter from nominee director;
The agreement for the provision of nominee service and indemnification of nominee.
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| Business Start-Up: Legal Requirements | | |
A flat or property management company limited by shares in England and Wales must have at least one director, one shareholder, and may have a secretary.
You need at least one person to form this type of company. If there is only one director, and that director is a natural person in your company, that director can also act as the secretary.
A company must have at least one director who is a natural person. This requirement is met if the office of director is held by a natural person as a corporation sole or otherwise by virtue of an office.
You can register a sole director' company, if you are familiar with the secretaries duties and responsibilities, because all of them belongs to a sole director.
The directors and secretary of your company can also be shareholders.
The Companies Act imposes no restriction on the minimum age of company directors. However Companies House will actively discourage the appointment of anyone under the age of 16 from taking up a company directorship on the grounds that the individuals concerned may not fully understand the legal liabilities that go with the position and for the most part will not have the experience necessary to perform the duties of a company director.
Under the Companies Act 2006, there is no restriction on any or all of the members/shareholders being from an overseas country (i.e. outside the United Kingdom in terms of residency, domicile, citizenship, place of incorporation or all or any of those concepts).
There is no requirement for the officers of your company to be UK citizens or residents, nor for them to hold valid work permits.
Owning, or being an officer of a UK company does not, however, grant you any right to live or work in the UK if you are a foreign national.
Your company must have a registered office address within England or Wales; this is the official address of your company and will be on the public record as such.
Your company must hold its official company documents at its registered office address: its register of shareholders, and its constitutional documents.
So long as you maintain a registered office address in England or Wales, you can conduct your business from any place in the world: you do not have to run your business from your registered office address.
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Company Formation Home Page >> Buying a Limited Company >> UK LLP RegistrationUK LLP FORMATION SERVICE. FORMING AN LLP IN THE UNITED KINGDOM. DEFINITION OF LIMITED LIABILITY PARTNERSHIP & LIMITED LIABILITY PARTNERSHIP BENEFITS. WHAT IS THE DIFFERENCE BETWEEN AN LLC AND AN LLP? Welcome to online Limited Liability Partnership - UK LLP formation agent. Whether you are suited to being your own boss and can start up on minimal resources are questions that can only be fully answered once you take the plunge. But the below sections will give you the best possible idea as to what's involved in going it alone, where you can find help and how others have fared when starting up a business. We recommend reviewing this site in its entirety, so that you are knowledgeable of the UK jurisdiction and the powers granted to British LLPs. We will guide you through the process of registering your limited liability partnership and establishing your registered identity. Complete and submit an LLP application form. Adequate completion and submission of this form, along with the provision of payment, will enable Coddan to incorporate your proposed LLP within five business days. We will express mail your documents to the mailing address you specify in your incorporation order. Upon SPECIAL request, we may provide registered address services across the UK (in any city or town) and we may provide you a telephone number with call forwarding from any UK city and town.
 Finding and Using Information: UK LLP Formation | Definition of Limited Liability Partnership | Starting a Limited Liability Partnership | The Greatest Benefit of Becoming an LLP | What is a LLP? | What is the Difference Between a LLP and LTD? | Who Can Register an LLP? | LLP Tax Aspects | UK LLP Act |
Partnerships have advantages in some ways and companies in others. Not just tax issues but also other issues, such as commercial ones, affected the decision as to whether to trade as a company on the one hand or a partnership/sole trader on the other. The truth is that the structure is a partnership, but it contains one or more limited companies as partners. This is what bewilders those who are only used to seeing traditional business structures. There are actually two entities involved, one the limited company or companies, and the other the partnership or partnerships of which they are members.
It has always been possible to set up partnerships with limited companies and individuals side by side, or partnerships just consisting of company partners, and indeed there is specific legislation for the way these partnerships are taxed, which has been on the statute book for years. For some reason, though, corporate partnerships have never really caught on in a big way, and we will come on to what we think is the reason for this. Unlike a traditional partnership, an LLP is a separate legal entity distinct from its members. In general, the LLP and not its members are liable for the debts of the LLP, thus affording the protection of limited liability.
UK LLP Formation:
In this respect, an LLP is akin to a limited company. Our fees for our LLP incorporation package are £160.00 and include the following items: LLP Incorporation, Companies House Incorporation Fees, bound copy of the completed LLP Agreement. In the United States, each individual state has its own law governing the formation of Limited Liability Partnerships. The original purpose of the LLP was to avoid the tax consequences of converting a general partnership to an LLC. However, in the last 5 years, most state laws have evolved to make this conversion a tax free event. Accordingly, one of the main purposes of converting a general partnership to an LLP, rather than an LLC, no longer exists.
The USA LLP is most popular among professionals, particularly lawyers and accountants. Each partner can be held jointly and severally liable for the ordinary business debts of the company, but if one partner commits an act of professional malpractice in the course of the partnership's business, that partner alone is liable to the injured party. For ordinary debts, every partner is fully liable even to the extent of their personal property.
If you want to become familiar with the description and the contents of British or Scottish LLP registration packages, offered by Coddan CPM LTD and to find above, what kind of service is included in this or that LLP incorporation package, to get an idea about the price of annual renewal of the service, and about the general legal requirements to the LLP incorporation within United Kingdom, please, select the package you need from the list, situated below the banner. The information in the banner will be renewed according to the package you've chosen. If you have any questions about how to establish a LLP then please E-Mail or call us: Call FREE 0800 081 1510, Overseas Residents: +44 845 020 4269 or +44 20 7748 3039, Fax: +44 20 7681 3318.
You may use this form to organise a new Limited Liability Partnership ยป Economy LLP Registration Package  | Establish LLP in Delaware |
Definition of Limited Liability Partnership:
Limited Liability Partnership Benefits: The Limited Liability Partnerships Act of 2000 created for the first time a British version of the American limited liability company (LLC). Like its America cousin it is governed by an Operating or Limited Liability Partnership Agreement and can be structured in a way to allow non-UK resident individuals, conducting all their business outside of the UK to enjoy the prestige of a genuine British entity without liability to UK taxes. However, it is important to note that tax consequences may be created in the jurisdiction of management and control and/or the fiscal residence of the beneficial owners depending on double taxation treaties and the specific drafting of the Partnership Agreement. Click here for our LLP Registration costs and full details of our packages for limited liability partnerships or call us for free no obligation advice. We have many Ready-Made LLP (off-the-shelf LLP), which are ready to trade, and can be transferred to you within hours.
The tax authorities in the United Kingdom have confirmed that the taxation base of a limited liability partnership will follow the procedure operated in the past for partnerships. The Limited Liability Partnership itself will not be liable for taxation on profits arising within the partnership, but the profits will be assessed to tax separately on the individual partners. A limited liability partnership must be a commercial venture operating for profit. Changes in the tax rules are anticipated to confirm that operation through a limited liability partnership by a charity or in relation to investment in shares or property will not be allowed.
The advantages of operating in this way are that no personal liability falls on a member of a limited liability partnership for the contracts or debts of the limited liability partnership and there is no joint or several liabilities for the negligence of any other member. The organisation of a limited liability partnership may well, therefore, be a popular vehicle for future use by the professions in the United Kingdom and for international business operated by non-resident partners outside of the United Kingdom. There may well be taxation advantages to be obtained from this route, where multi-national business is being undertaken by an international group of partners.
Starting a Limited Liability Partnership:
Starting a Limited Liability Partnership. How is a LLP Taxed? The key advantage of a LLP compared with a traditional partnership is that the members of the LLP (it is important that they should not be called partners but members) are able to limit their personal liability if something goes wrong with the business, in much the same way as shareholders in a limited company are able to. Where business owners have wanted to limit their personal liability in the past, they have normally set up limited companies and any profits made by those companies are subject to corporation tax. Dividends paid by the companies can then be taken as income of the shareholders. LLP's are taxed quite differently in that the profits are treated as the personal income of the members as if they had run their business as a partnership. The taxation of companies and partnerships is very different but taxation should not be the main consideration in choosing a business vehicle. Download Forms:
Application for Incorporation of a LLP form LLP2
Appointment of a Member to a LLP form 288a
Notice of Designated Member Form LLP8
Change of Particulars of a Member of a LLP form 288c
Location of Register of Members Form 353
Annual Return of a LLP Form LLP 363
Change of Accounting Reference Date of a LLP form 225
Notice of Change of Name of a LLP Form 3
Terminating the Membership of a Member of a LLP Form 288b
Application for Striking off a LLP Form 652a
Live Help ยป Live Help is a real time "chat" feature which enables you to interact with a customer service representative without a phone call. Get answers to your questions while using our website. Clicking the "Live Help" button will start an on-line session with one of our representatives. Live Help is currently available during normal business hours. Outside of the above opening hours our business center will be closed. When you click on the button you will see an e-mail form that will allow you to send us a mail with your questions. Live Help is absolutely free! There are no hidden fees. We offer the service as a courtesy to our website visitors.
Dear visitors, while having a chat session with a customer, we are frequently requested to give a piece of advice on tax planning or business structuring. We would like to inform you that it is against our principles to provide online advice pertaining to these issues. The points that may be covered during a session include service description, package or service price, navigation at our website, ways of making an order, methods of payment etc. Yet, if you wish us to provide you with advice on tax or business structuring, you should be aware that this service is chargeable.
A LIMITED LIABILITY PARTNERSHIP IS ESSENTIALLY A GENERAL PARTNERSHIP, BUT EACH PARTNER IS NOT TO LIABLE FOR CERTAIN ACTS OF OTHER PARTNERS. LLP FORMATION SERVICE FROM CODDAN - £160.00: At present there are in the order of 600,000 partnerships in the United Kingdom. These encompass the full spectrum of business and industry, for example, retail, construction, manufacturing, hotels and restaurants, health, and estate agents as well as the professions. In contrast to countries such as USA, Australia and Canada, it is not possible in the UK to retain the internal structure of a partnership whilst enjoying limited liability status.
As a result partners' personal assets are not protected against claims for which they have no personal responsibility. The objective is to keep the legal framework for business in Great Britain at the forefront of international practice by offering firms the ability to incorporate with limited liability whilst organising themselves as partnerships rather than as companies; whilst at the same time providing safeguards for those dealing with this new form of corporate business. These safeguards include the public disclosure of information about the firm, particularly its finances, and safeguards in the case of insolvency.
It should be stressed that the decision to become an LLP will be a voluntary one, based on commercial considerations. The intention is to offer an alternative choice of vehicle to business. This will help to ensure that Great Britain remains an attractive location for business, allowing GB registered firms to operate competitively with their overseas counterparts. This is seen as of particular value to very large professional partnerships operating in global markets, who might otherwise be tempted to incorporate outside Great Britain.
As a business owner, you will be faced with many important decisions, including what corporate entity to use in your busines. While many countries allow the typical structures of sole-proprietorship, partnership, or limited company for business ownership, now you have the ability to form a limited liability partnership. The limited liability partnership is essentially a form of limited partnership with one significant difference. In a limited partnership, general partners are liable for the partnership's debts and obligations whereas the partners in a limited liability partnership are statutorily provided full-shield protection from partnership liabilities, debts and obligations.
An LLP comprises members and designated members, full details of which must be filed at Companies House. A British LLP must have at least two designated members and the designated members will be responsible for carrying out the duties which would normally be completed by a director or company secretary of a limited company, for example filing any necessary paperwork at Companies House. Designated members can be subject to financial or other penalties if they default in their duties.
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| 1. LLP subscribers may be residents outside the UK.
2. You must appoint a minimum of 2 Members (Partners).
3. Members can be corporate bodies or private individuals.
4. A Member can be of any nationality.
5. They have legal identities separate from its members.
6. Individual members are almost totally protected against liability.
7. Management, distribution, etc., are governed by the partnership agreement.
8. A British LLP must have at least two designated members.
9. You have to register with Companies House, the method is similar to registering a company.
10. UK LLP can buy and sell property in the name of the organisation.
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 info@usaformation.com |
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Members of an LLP are afforded the protection of limited liability. There are two notable exceptions to this protection: Insolvency. In the event of the LLP becoming insolvent, members can be required to repay profits (with interest) and other property which has been withdrawn from the LLP within the preceding two years. Such repayment can only be sought if the member knew or ought to have realised that there was no real prospect of the LLP avoiding insolvent liquidation. This test encompasses a subjective and an objective test element and has regard to the member's actual knowledge and belief and the knowledge and belief which would be expected of a similar person carrying on the same function of that member. Personal fault. If an individual member is purported to have been negligent, it may be possible to bring a civil negligence action against that individual. However, the courts have indicated that they would have regard to whether the allegedly negligent advice was given in a personal capacity or whether the LLP assumed responsibility for the advice.
The Greatest Benefit of Becoming an LLP:
Perhaps the greatest benefit of becoming an LLP is the rule that an LLP partner's personal assets will generally NOT be at risk in the event of a financial disaster resulting from business losses, or errors and omissions or other tortious conduct of an employee or a co-LLP partner. Thus, the LLP law eliminates personal exposure for vicarious tort liability as well as liability for partnership debts and obligations such as bank loans and lease obligations. The LLP law does not, however, change the fact that an LLP partner will still be personally liable for his or her own errors and omissions; whether arising from his or her own acts or failures to act, or negligent supervision of associates and staff.
This differs markedly from general partnership law which imposes joint and several liability on general partners for all tortious acts of their co-partners acting within the scope of their actual or apparent authority, and joint liability for all other partnership debts and obligations. Forming a limited liability partnership is similar to forming a limited company. Incorporation is a simple process, which we have tailored to provide an easy route to completion of the necessary formalities. Once you are happy with your decision that an LLP is the correct vehicle for your business venture, simply follow the link below to our LLP order form and submit the information as requested. Click here to incorporate a British LLP online!
An LLP can be incorporated wherever "two or more persons associated with the carrying on a lawful business with a view to profit... have subscribed their names to an incorporation document..." (LLP Act 2000). LLPs are incorporated by registration at Companies House. An incorporation document (Form LLP2) to which the initial members have subscribed must be submitted to the Registrar of Companies along with a registration fee. The incorporation document will set out the name of the LLP along with its registered office, as well as the names, full addresses and dates of birth of each member.
The profits of the business of an LLP will be taxed as if the business were carried on by partners in partnership, rather than by a body corporate. This ensures that the commercial choice between using an LLP or a partnership is a tax neutral one. The taxation clauses in the Act are expressed in broad terms so that the existing rules for partnerships and partners will, in general, simply apply to LLPs, and members of LLPs, which are carrying on businesses, as if these were partnerships and partners respectively.
The transfer of an existing business to an LLP will only be treated for tax purposes as giving rise to a cessation of the business of the partnership which is making the transfer if in otherwise identical circumstances a transfer between one partnership and another would do so. The transfer of assets between a partnership and an LLP will only give rise to chargeable gain or capital allowance consequences if, in otherwise identical circumstances, a transfer of assets between one partnership and another would so do. Similarly, Inland Revenue Statements of Practice and Extra Statutory Concessions will apply to LLPs and members of LLPs as they apply to partnerships and to partners.
Administrative set up. UK Limited liability comes at a price: the LLP's annual accounts are in the public domain. LLP's have to provide financial information to Companies House and have to file audited annual accounts which are similar to those of a limited company. The name and profit share of the highest paid member must be included within the filed accounts. Similar to a conventional partnership arrangement, the agreement between members of an LLP remains private. This is in contrast to the Articles of Association of a limited company which must be filed at Companies House and are on the public record. The management of an LLP and the relationship between the partners is more flexible than that of a limited company. Whereas a limited company incorporates the statutory management controls imposed by the Companies Acts and other legislation, an LLP can be managed in almost any way that the members wish.
LLP's and their members are not covered by partnership law (implied by statute and common law) as its applicability is expressly excluded by the LLPA 2000. This means that a limited liability partnership agreement will usually be longer than a similar conventional partnership agreement because it must cover matters which may otherwise be incorporated into the agreement by statute or common law. It is possible for a LLP to exist without any written agreement as the (LLP Act 2000 will impart very rudimentary provisions into the arrangement. However, these minimum provisions will be unsatisfactory for most businesses.
Stamp duty relief on conversion. A partnership which converts to an LLP will be eligible for stamp duty relief on property which is transferred within the first 12 months of incorporation provided that: all of the partners in the existing partnership convert to the LLP; the interest of the original partners in the partnership property is the same under the UK LLP as under the pre-LLP partnership.
Coddan offers UK LLP formation services, including nominee secretarial and nominee designated partners' services. We have assisted thousands of companies around the world establish and maintain their new or existing business formations. When you're ready to form a corporation or file a limited liability partnership, you can even take advantage of our online services to start the whole process online twenty-four hours a day, seven days a week. When you place an order with us, we receive only your order information - the titles you have selected, quantity, total cost and shipping information. Your credit card data is sent to our credit processors secure server and processed there.
We never see your credit card numbers or expiration date. We can offer you the choice of three LLP registration packages to suit your practice requirements and to fit your budget. We do not cut costs on expertise and quality but still maintain a cost effective pricing structure. We can help you, if you need a limited liability partnership (LLP) or limited company. Our UK LLP incorporation packages start at just £160.00.
Coddan' LLP formation service includes: limited liability partnership name check; Form LLP2 is sent to you for signature by all the initial members with guidance notes on the completion of the form. This form should then be returned to us as soon as possible. We will again check the availability of the name before filing the document at Companies House and will advise you if there is any problem.
A limited liability partnership MUST have at least TWO members. If membership falls to only one member and the limited liability partnership continues to carry on business for more than 6 months, then the benefits of limited liability are lost. If necessary we can provide you with a nominee member to fulfil this requirement. Nominee designated partners - £125.00. The designated partners are responsible for the LLP's statutory filing obligations with the Registrar of Companies (incl. Signed General Power of Attorney).
WHAT IS A LLP (LIMITED LIABILITY PARTNERSHIP)? Historically, lawyers organized themselves as general partnerships. For many years, general partnerships were the only way that lawyers could legally practice together. General partnerships did not need any kind of charter or written constitution, which corporations needed. Companies are required to keep minutes of the meetings of shareholders and the boards of directors. No such documentation burdens exist for general partnerships.
British limited liability partnership (LLP) is a new form of legal business entity with limited liability. Limited liability partnerships are taxed as partnerships but in most other respects they are very similar to companies. They MUST have at least two, formally appointed, designated members at all times. (Designated members are similar to executive directors and the company secretary of a company). If there are fewer than two designated members then every member automatically becomes a designated member. Provided that no business or trade is carried out with or within the United Kingdom and the members are located outside of the United Kingdom then LLPs have no liability for United Kingdom taxation.
Basically this is because the limited liability partnership itself will not be liable for taxation on profits or gains, the profits or gains of the partnership will be assessed to tax separately on the individual partners. IF THESE ARE LOCATED OUTSIDE THE UNITED KINGDOM THEN NO UK TAX IS PAYABLE.
An LLP does not have a memorandum or articles of association or a specified management structure. Consequently, in order to avoid potential disputes over the management of the company and the conduct of the members it is important that the members enter into a valid and effective agreement between themselves before the LLP is incorporated. The members agreement should cover the sort of issues dealt with in a normal partnership agreement. Partnership law is expressly disapplied from LLPs and as such it is important that the members agreement is extremely comprehensive. If the members agreement is silent on certain issues there is a provision under the LLP regulations for certain default provisions to apply, but those default provisions would almost certainly be unusuable.
An LLP is also considered to be a 'Legal Person' in its own right, and can operate in the same way as a company in most respects. However the one important difference between an LLP and a limited company is the way in which the profits are taxed, with each MEMBER of the partnership being taxed according to the share of the profits that they receive rather than the LLP paying tax directly on its profits. This structure may offer advantages to non-UK residents.
Can A United Kingdom LLP Be Used For Investment Business Or Property Holding? The Inland Revenue Tax Bulletin Issue 50 confirmed that a UK LLP carrying out a trade or profession will be treated as a partnership for tax purposes. They also state that the guidance does not cover the tax treatment of investment business or property holding for which the LLP structure was not originally intended. Therefore we do not recommend that a British LLP be used for investment business until it is clear how the UK Revenue intends to tax such ventures.
How Is A United Kingdom LLP Taxed? The explanatory notes to the first draft of the UK LLP Bill stated that the treatment of an LLP as a partnership and members as partners will apply for all tax purposes. Section 10 of the LLP Act states that where an LLP carries on a "business with a view to profit" the members will be treated for the purposes of income tax, corporation tax and capital gains tax as if they were partners. Section 125 of the 1995 Finance Act has the effect of restricting the charge to tax on a non-resident partner of a United Kingdom partnership to its share of the profits of the business carried out in the UK where the partnership business is carried out partly in the UK and partly abroad. From this we can see that where a non-resident partner receives profits from a UK LLP in relation to a business that is carried out wholly outside the United Kingdom, no UK income tax or corporation tax should arise.
WHAT IS THE DIFFERENCE BETWEEN A LIMITED LIABILITY PARTNERSHIP AND A LIMITED COMPANY? The main difference is that a limited liability partnership has the organisational flexibility of a partnership and is taxed as a partnership. In other respects it is very similar to a company.
WHO CAN FORM A LIMITED LIABILITY PARTNERSHIP? The Act generally allows two or more persons associated for carrying on a lawful business with a view to profit to form a limited liability partnership by subscribing to its incorporation document - Form LLP 2. (In law, "person" includes individuals and companies.) However, English and Scottish limited liability partnerships are not available for all activities such as non-profit making activities.
The new structure is very similar to the American LLC therefore the United Kingdom LLP is a corporate body with a separate legal personality. The LLP must have at least two members in the partnership, which can be resident anywhere in the world. The members can be natural persons or corporate bodies. Like its America cousin it is governed by an Operating or Limited liability partnership Agreement and can be structured in a way to allow non-UK resident individuals, conducting all their business outside of the UK to enjoy the prestige of a genuine British entity without liability to UK taxes. However, it is important to note that tax consequences may be created in the jurisdiction of management and control and/or the fiscal residence of the beneficial owners depending on double taxation treaties and the specific drafting of the Operating Agreement.
However, a United Kingdom LLP is very different from a United States Limited Liability Company (LLC) and may therefore not be as attractive to a US law firm operating in the UK. The United Kingdom limited liability partnership is a new form of corporate body, which is now likely to be used for tax efficient international trading and business activity. An overseas limited partnership CANNOT usually register in the UK, as the principal place of business must be in the United Kingdom and an overseas partnership would normally have its principal place of business abroad.
The limited liability partnership (LLP) is a separate legal entity with unlimited capacity so that an LLP can do anything that a natural person could do. It has the ability to enter into contracts and hold property, and will continue in existence in spite of any change in membership. While in law an LLP is separate from its members, its members may be liable to contribute to its assets if it is wound up; the extent of that potential liability is as specified in regulations under the Act (Section 1 (4)). The limited liability partnership's existence as a separate legal entity makes it more closely akin to a company than to a partnership (except insofar as the internal relations are governed by agreement between the members). The Act therefore draws on the principles embodied in the companies' legislation.
As an LLP is a body corporate, Partnership Law will not in general apply to an LLP. Elements of Partnership Law may, however, be applied to LLPs by regulations (Section 15 (c)); such regulations will apply in the absence of agreement as to any matter concerning the mutual obligations of LLP members, or LLP members and the LLP (Section 5 (l) (b)). Care is needed, when an LLP has been established, that the members (who enjoy limited liability behind the Limited liability partnership) do not establish relationships between themselves which would amount to a partnership (under the Partnership Act 1890) in effect running in parallel to the LLP. Clearly any such parallel partnership would not enjoy limited liability.
In any dealings with third parties, it should be made clear that the only contracting party is the LLP. The members should avoid in any documentation between themselves any suggestion that there are any mutual agency relations between members; a member's only agency relationship should be as an agent for the LLP. Some advisers consider that, to avoid problems in this area, the use of the term "partner" to describe members should be avoided, and that use of the words "the partnership" or "the firm" to describe the LLP should similarly be avoided.
The LLP's existence as a corporate entity means that the effect of the general law is different from its effect on a partnership. For example, a third party will usually contract with the LLP itself rather than with an individual member of the LLP whereas, in general, a partner contracts as principal and on behalf of the other partners. Should a partner be negligent in work carried out for a client, there will generally be two possible causes of action against that partner: contract and tort. However, because the Limited liability partnership will be a separate legal entity with which the client has contracted, only one action (the tort action) is potentially available against the member.
As regards the management of the internal affairs of the LLP the position is similar to that applicable to partnerships. Members will not be obliged to enter into a formal agreement among themselves and, if an agreement is entered into, there will be no obligation to publish it. As in the case of partnerships, however, there will, in general, be clear advantages in having a formal written agreement between members to regulate the affairs of the undertaking and to avoid disputes between them. The formal procedures needed to establish an LLP, including the need for an application to the Registrar, are likely to encourage the members to set up a formal arrangement before the LLP commences business.
The Regulations do, however, include default provisions governing the relationship between the members, which apply where no agreement exists or the agreement does not include provision to deal with a particular issue. The profits of the business of an limited liability partnership are taxed as if the business were carried on by partners in partnership, rather than by a body corporate. This is intended to ensure that the commercial choice between using an LLP or a partnership is a tax neutral one.
LLPs will be subject to the same taxation regime as current partnerships and will still be able to regulate their internal constitution by a confidential partnership agreement. However, the LLP will constitute a separate legal person and third parties will contract with the firm rather than with individual partners. Although partners will be liable for their own acts they will not be liable for the acts of their fellow partners, for which the LLP as a whole shall be liable. We are not in a position to advise on all the US tax consequences of a UK LLP, but it is clear that the US views the LLP as a corporate vehicle for US tax purposes so giving the LLP entirely different UK tax and US tax treatments.
For example, a US group investing in the UK and having part of its group in the UK, may find the LLP is able to benefit from the favourable UK tax treatment touched on above whilst ensuring, for US purposes, that certain UK profits would not be taxed in the US until the L.L.P. distributes those profits to the US entities in the group.
Whilst the US and Great Britain tax advantages of the LLP very much depend on the particular circumstances of the relevant corporate group, the LLP is unique amongst UK vehicles in having such a split United Kingdom and US tax treatment and should be considered carefully for any group restructuring. We are now able to register United Kingdom limited liability partnerships for you. We offer a range of options to help you lodge your LLP at Companies House quickly and easily and ensure you can administer it with the minimum of fuss once it is registered. UK limited liability partnership incorporation is tailored to your own specifications and is registered in less than 120 hours.
All you need to do is check that your limited liability partnership name has not already been registered and completes the details on the order form. We will then carry out new LLP formation as your incorporators. If you ask us to register your LLP for you without of nominee designated partners all you need to do is tell us the name you want to register, on the order form, and send us: Form LLP 2 duly completed; and your remittance, duly completed.
RELEVANCE TO PRIVATE EQUITY STRUCTURES In a typical limited partnership fund structure, a company will be the general partner of the limited partnership fund, which will contract to receive management supplies from a management company. For the reasons set out below, private equity and venture capital houses (and especially smaller, independent houses) should consider whether it may be more tax efficient to use an LLP instead of a company to carry out the management function, by transferring the management role of existing or new funds from the management company to a new LLP. Executives would be members of the LLP, instead of being employed by the management company. As the liability of members of an LLP is limited, any additional liability risks for executives will generally be manageable.
TAX ASPECTS The main tax consequences of using an LLP are as follows:
Tax Transparency. The fees earned by the management LLP will accrue directly to its members, in the same way as they would in an ordinary partnership. That compares to a management company, which pays tax on its profits. However, an LLP cannot be in a group with other companies for the purposes of loss relief and capital gains tax so that, for example, excess management expenses of a corporate general partner cannot be surrendered to it.
National Insurance. The national insurance position of members of an LLP is the same as that of partners in an ordinary partnership. The members themselves will pay class 2 and 4 national insurance contributions which will amount to approximately £2,200 a year, together with the 1% surcharge on profits introduced in 2003. As the members of an LLP are, strictly speaking, self-employed, there will be no obligation on the LLP to pay employer's national insurance contributions on such amounts, only on the amounts of the payments to employees of the LLP. A company would have to pay national insurance contributions at the rate of 12.8% on the value of the employees' salary/benefits.
Restricted Securities Regime: Part 7 ITEPA. Schedule 22 of the Finance Act 2003 (now incorporated in Part 7 of ITEPA). introduced sweeping changes to the tax treatment of securities and interests in securities acquired by reason of employment. Where any such securities or interests in securities are acquired on or after 16 April 2003, and where any condition or restriction applies which would or could reduce the market value of those securities, they will fall within the new regime. When the restrictions fall away, or when the securities are sold, an income tax charge will arise based on market value, with a proportionate deduction depending on what the employee paid (if anything) to acquire the securities. There could also be PAYE and national insurance liabilities.
This regime raises problems both for the management company structure and for a structure using an LLP. Normally, the executives would be employees of the management company. If they are also awarded shares in the company, such shares would almost certainly be employment related securities and may fall within the restricted securities regime. However it will not be in every case that shares will be awarded to the executives, and it may now be sensible, taking other commercial considerations into account, not to award shares. The new regime also creates two potential problems for members of an LLP. First, the term "securities" is extremely widely defined and includes units in a collective investment scheme, which term is also given a broad definition.
It is potentially wide enough to cover any partnership but the Revenue have indicated that it would not cover one that is trading. Although the LLP may be carrying on a trading activity (for example, as manager of a fund), if it has a significant investment (and this could include its shareholding in the general partner company) this could bring it within the collective investment scheme definition and therefore interests in it would be "securities" for the purposes of the legislation.
Secondly, "employment" is also widely defined, including both former and prospective employments. Therefore if a group of existing employees operating through a management company re-forms and creates an LLP, they will probably acquire an employment related security (their interest in the LLP) by virtue of a former employment. Similarly, if a new joiner becomes a member of an LLP and at the same time it is expected that he will join the board of an investee company, he may acquire his LLP interest in connection with that prospective "employment" (a non-executive directorship counts as "employment" for these purposes).
It is possible to make an election to disapply the restricted securities regime. If there is the slightest possibility that the LLP itself could be a collective investment scheme as described above, and if the former or prospective employment condition could apply, the founder members of the LLP should make such an election, before the LLP acquires an interest in the general partner company. Making such an election could give rise to an income tax liability on joining the LLP but that liability will not be significant if the LLP has no real value at that time.
Carried Interest. Where executives are employed by (or are directors of) a management company, there will always be an "employment" and it will be more difficult to ensure that carried interest is not within the restricted securities regime, especially for those who join after the fund has been raised. The entitlement of an LLP member to receive carried interest would not normally be an employment related security. However, if the members' interest in the LLP itself is an employment related security as described above, and carried interest holders (members of the LLP) obtain carried interest through their LLP membership, the carried interest is also deemed to be obtained from employment.
Also, if any individual members of the LLP hold an office or employment with any company or other person connected with the LLP (for example, a general partner company or an investee company controlled by the fund) the opportunity for those LLP members to receive carried interest can be deemed to arise from that office or employment, and the result would be to bring the carried interest within the restricted securities regime. We do not believe that the new rules were intended to have this effect and discussions are taking place with the Inland Revenue to seek clarification.
It should be emphasised that an interest in an LLP will not in every case be regarded as an employment related security, and with careful structuring, this possibility can be avoided. Specific consideration should always be given to whether an election to disapply the regime should be made, in which case the possibility of adverse tax consequences is minimised, and the benefits of the LLP structure can apply without subjecting members to tax on deemed employment income.
Personal service company rules. The Inland Revenue impose income tax and national insurance charges in situations where an individual provides services through an intermediary company in circumstances where, in the absence of an intermediary, the individual would be an employee of the ultimate recipient of the services. The legislation itself seeks to apply the tax charges where "an individual personally performs, or is under an obligation personally to perform, services for the purposes of a business carried on by another person." As the LLP (which will be separately regulated) is not providing the services of any particular individual performing the services, the Inland Revenue may accept that there will be no income tax or national insurance liabilities, because there is no intermediate entity to which the legislation could apply. However, careful structuring is required to ensure that the arrangement is not vulnerable to attack on these grounds.
Flexibility for Changes of Partnership Interest. Using an LLP could give greater flexibility when changing the interests held by the members of the management entity. Where the entity is structured as a company, any award of shares or share options to a new executive joining as an employee could give rise to an income tax liability. If the management entity is an LLP, new joiners could immediately be given equity with no tax consequences, provided that the arrangement is structured in such a way that there is no possibility of the restricted securities regime applying.
Sale of shares in management company. A sale of shares in a management company could potentially give rise to a tax charge on capital gains, although business asset taper relief would apply to any disposal, with the maximum rate of taper (an effective tax rate of 10% for a higher rate taxpayer) applying after only two years' ownership. Sales of shares in a management company can be made tax-free by a trust established by non-residents or non-domiciliaries.
Sale of management business where LLP used as management vehicle. Business asset taper would of course also apply to a disposal of a partnership share in a trading LLP. However, on a disposal of the entire management business, there may not be any significant assets as the main asset would be the contract to manage the limited partnership. Gains made on the sale of an LLP interest by trusts set up by non-domiciliaries or non-residents as mentioned above will remain liable to capital gains tax because the trustees will be treated as carrying on a trade in the UK, but incorporation of the LLP prior to disposal of the business may improve the position.
Stamp Duty. The transfer of an interest in an LLP is liable to stamp duty at the relevant rate, that is, at 1%, 3% or 4%, depending on how much is paid for the transfer. Such interests are treated for stamp duty purposes as if they were interests in a general partnership, rather than as shares which would attract stamp duty of 0.5%.
Interest Relief. Where new partners take out a loan to join the LLP (which has a trade), interest relief will be available.
Liquidation. When an LLP ceases to trade, the tax transparency also ceases so that the LLP will be subject to corporation tax on its chargeable gains when amounts are realized on final dissolution. Management LLPs set up to manage a particular fund which are not intended to be used for other future funds may therefore fall foul of this rule; however, it is difficult to see exactly what assets the LLP would have at that stage, as it is a service entity, rather than providing goods and therefore having stock in trade assets. Even then, the Inland Revenue have said that they will not take the point unless the LLP is being wound up for tax avoidance reasons, or the period of winding up is protracted.
Pensions. Members of an LLP will have to make their own personal pension arrangements out of their proportionate share in the LLP's profits. The maximum contribution which can be made is 17.5% of net relevant earnings up to £99,000. Older members (36 plus) will be in a slightly better position, as they can contribute between 20% and 40%, depending on age.
VAT. Since an LLP is a body corporate, the LLP itself is the legal entity for VAT purposes. It can therefore be registered for VAT and, most importantly, in the typical limited partnership scenario, it can be VAT registered as a group with the general partner, provided that the control test is met, that is, either the LLP will have to have the general partner as its subsidiary, or the general partner would have to be a controlling partner in the LLP (it seems that the former scenario is much neater).
There are both advantages and disadvantages to adopting an LLP structure, and anyone considering whether to go down this route would need to analyse all the relevant factors by reference to their own individual circumstances. The decision will be a finely-balanced one and will depend on a range of factors, including the extent to which the executives involved in management are to share in incentive arrangements. In many cases it will be advantageous to use an LLP as the management vehicle, because there will only be a risk that the restricted securities regime will apply if the structure falls into one of the specific traps, and it will generally be harder to avoid these traps using a management company structure.
BACKGROUND TO THE LIMITED LIABILITY PARTNERSHIP ACT: The Limited Liability Partnerships Act 2000 came into force on 6 April 2001 (by virtue of Statutory Instrument no. 3316 of 2000). The main purpose of this new Act is to create a new form of legal entity, the Limited Liability Partnership. An LLP combines the organisational flexibility and tax status of a partnership with limited liability for its members. This limited liability is made possible by the fact that an LLP is a legal person distinct from its constituent members.
The Act empowers the government to apply the provisions of company law and insolvency law, with appropriate modifications, to LLPs. These powers have been used, through the issue of the Limited Liability Partnerships Regulations 2001, as the basis for much of the constitutional structure of LLPs and has enabled safeguards to be put in place for those dealing with LLPs. The safeguards include provision for the public disclosure of information about LLPs, particularly their finance, and provisions dealing with the situation if an LLP should become insolvent.
In general, the Act has effect only in England, Wales and Scotland. In Great Britain businesses are structured mainly as limited companies, partnerships or sole traders. Each of these is subject to different regulatory and tax regimes reflecting their organisation and ownership. The only option for many professional practices, in the past, has been to operate as partnerships, since either the general law or the rules of their professional body denied them the ability to incorporate. Accountancy firms have, for instance, only been permitted to incorporate since 1989. As such professional practices were required to operate as partnerships, they were subject to the legal rules relating to the liability of partners.
The Partnership Act 1890 sets out special rules relating to the liability of partners to persons dealing with them: all partners are liable jointly, and in Scotland severally also, with their other partners for all the debts and obligations of the partnership incurred during their membership. All partners are jointly and severally liable for any loss or damage arising from the wrongful acts or omissions of any of their partners (as well as their own) arising in the ordinary course of the partnership's business or with the authority of the partners. When the members are liable jointly and severally for any loss or damage, this has the effect that an injured person may opt to sue one or more of the members separately or all of them together.
These arrangements were generally appropriate when all partnerships were small and the partners were of the same profession working closely with one another. However, unlimited liability for partners has become an increasing cause for concern in the light of: a general increase in the incidence of litigation for professional negligence and in the size of claims: the growth in the size of partnerships (since in a very large partnership not all the partners will be personally known to one another); the increase in specialisation among partners and the coming together of different professions within a partnership; and the risk to a partner's personal assets when a claim exceeds the sum of the assets and insurance cover of the partnership. Although these concerns arise most acutely in very large professional partnerships they are relevant to partnerships generally.
The Limited Liability Partnership goes some way towards addressing these concerns since its members benefit from limited liability, the LLP being a separate legal person. In general the LLP and not its members will be liable to third parties. Proposals that it should be possible in Great Britain to organise a business as an LLP emerged out of a review of the law of joint and several liability. In 1996 the DTI published a feasibility investigation of joint and several liability carried out by the Law Commission. The investigation focused mainly on the joint and several liabilities of professional defendants, seeking to ascertain whether there was an arguable case for replacing joint and several liabilities by, for example, a system whereby each defendant might be liable for only a proportionate share of the loss.
The DTI took the opportunity to consult on the distinct but related question whether to amend the law in Great Britain to allow Limited Liability Partnerships. This question was asked in the knowledge that the concept of LLPs was well known in some overseas jurisdictions, particularly the USA. Jersey too was working on implementing its own LLP legislation in response to representations from the accountancy profession, with a view to attracting offshore registrations.
In February 1997 the DTI published a consultation paper 'Limited Liability Partnerships: A New Form of Business Association for Professions' (URN 97/597). The response to the paper confirmed that there was a demand for the new vehicle across a wide range of professions, and agreement in principle from those consultees who are potential clients of and providers of capital to LLPs. The paper was followed by the publication of a draft Bill and regulations (URN 98/874) in September 1998. Revised draft regulations were published again for consultation, together with the draft Bill (URN 99/1025) in July 1999. In February 2000 a further consultation document was published concerning regulatory default provisions governing the relationship between members (URN 00/617), and revised regulatory default provisions were published in May 2000 (URN 00/865). The outcome of the various consultations was the enactment of the Act by Parliament in July 2000 and the issue of the Regulations in March 2001.
It should be noted that in the UK, a LLP will normally be taxed as though transparent for taxation purposes so that the profits, losses and gains will be directly attributable to the partners themselves. Whilst the most emotive differences may relate to the public disclosure requirements, the other differences between a UK LLP and US LLC may have a significant financial impact for a new business and the partners when setting up in the United Kingdom. There is also uncertainty how a United Kingdom LLP will be taxed in a foreign jurisdiction as the United Kingdom LLP has a distinct separate corporate legal personality in the United Kingdom. It is therefore possible that some foreign jurisdictions may seek to tax income or profits arising in their country as though the LLP were a body corporate. Great care will then need to be taken if it is desired to operate in the UK through a LLP business vehicle and consideration should be given to using the LLP vehicles available in alternative jurisdictions.
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U.K. Limited companies
UK LLP Registration
