Appleleaf Accountancy
Client Portal
  • Home
  • About Us
  • Services
    • Management Accounts
    • Accounts Preparation
    • Business Start-Up Support
    • Bookkeeping Services and VAT Returns
    • Cloud-Based Software Solutions
    • Payroll, PAYE and Auto Enrolment
    • Company Secretarial
    • Company Formations
    • Personal Tax and Tax Planning
    • Contractors and IR35
  • Testimonials
  • Advisory
  • News
    • News
    • Autumn Statement 2023
    • Spring Budget Report 2023
    • Autumn Statement 2022
    • Mini Budget 2022
    • Spring Statement 2022
    • Autumn Budget 2021
  • Client Portal
  • Get in Touch
Client Portal

Slide News

weighing up LLPs

creative772019-11-15T10:43:55+00:00

A limited liability partnership (LLP) is similar to an ordinary partnership in that a number of people or limited companies join together and share the costs, risks, and responsibilities of the business. They also take a share of the profits and pay income tax and NICs on their share of the partnership profits.

However, an LLP differs from an ordinary partnership in that its debt is usually limited to the amount of money each partner invested in the business and to any personal guarantees given to raise business finance. Therefore, members have some protection if the business runs into difficulties because their liability is restricted in general terms to the level of their investment.

So, what other advantages can an LLP as a trading vehicle offer?

advantages

Along similar lines to a company, an LLP is a separate legal person, meaning that the members are not personally or jointly liable for the LLP’s debts, and all contracts are between the LLP and its clients or third parties. If the LLP becomes insolvent, a member’s personal liability is normally limited to the amount of their agreed capital contribution plus the value of any personal guarantee. However, where negligence is involved, members may be personally liable to the full extent of their assets if they have assumed personal responsibility for the advice or work.

The separate legal entity status also means that there is no need, for example, to transfer legal title to property on a change of membership. LLPs also have unlimited capacity and can enter into contracts and hold property in the same way as an individual.

Members of the LLP are usually taxed as if they were partners and not employees or directors. They are therefore not liable to pay PAYE or Class 1 NICs.

Businesses often find it easier to recruit new members to an LLP than to an ordinary partnership, where the prospect of unlimited liability can be a major disincentive to potential partners.

disadvantages

The benefits of limited liability combined with a favourable tax treatment should not be underestimated, but they do come at a price, most notably the associated disclosure obligations.

Where the LLP’s profit before members’ remuneration exceeds £200,000, there is a requirement to report the amount of profit attributable to the highest paid member (but not their name). Other disclosure includes total members’ remuneration, total members, average members’ remuneration and related party transactions.

There will be costs to set up the LLP and ongoing filing fees. The administrative costs in notifying clients and suppliers and transferring bank accounts, leases and agreements will need to be considered.

Corporate-type accounts have to be prepared, circulated to each member and filed on a public register within nine months of its year end. LLP accounts must comply with UK generally accepted accounting principles and other specific regulations.

Loans and debts due to members (the equivalent of partnership current accounts), are required to be shown as liabilities rather than as part of capital alongside the partnership capital accounts. This in turn reduces the LLP’s net worth and may affect its credit rating and borrowing capacity.

In relation to tax matters, the following areas will need careful thought:

  • tax relief for losses in trading LLPs is restricted
  • there will be no scope for tax-efficient share incentives for staff as there are with a company
  • anti-avoidance provisions may apply to ‘disguised employment’ situations

Weighing up the pros and cons, in many cases, an LLP is likely to be more attractive to those who would have formed a partnership rather than a limited company, but who ultimately seek the benefit of limited liability.

Are you currently trading through a partnership and considering your options? Or are you a new startup business looking at which structure is right for you? If so, please do not hesitate to give us a call on 01472 287387 or complete our enquiry form below, as we can provide the proactive advice, that is tailored to your individual circumstances.

get in touch

 

Share this post

Facebook Twitter LinkedIn Google + Email

Related Posts

car

Running a car on the company – Benefit in kind, car allowance, company fuel cards

Despite successive Governments changing the rules to increase the tax take, the provision of company cars remains one of the... read more

reciepts

Business expenses – what can you claim?

It is important to keep good records of business expenses so that any expenses that can be deducted are not... read more

accountant

Why Accountants Are Essential To Your Freelance Success

As a budget-conscious freelancer you may be put off by the cost of hiring a professional accountant. You might see... read more

Paye

Employers PAYE — introduction of variable direct debit payment plan from October

From Monday 3 October 2022, HMRC are introducing a new payment system where employers’ PAYE customers can pay via variable... read more

The 2019/20 Tax Year Is Over: Here’s What You Need to Do Now

The 2019/20 tax year has ended. That news might almost come as a surprise. I mean, amidst all the upheaval we’ve been... read more

holding living wake sign

National Living Wage and National Minimum Wage Changes from April 2021

Under the minimum wage legislation, workers must be paid at least the statutory minimum wage for their age. There are... read more

How to prepare your business for an HMRC tax investigation

As a business owner, the thought of an HMRC tax investigation can be quite daunting. However, our article below outlines what... read more

HMRC Have Published Additional Information on the Job Retention Bonus

Job Retention Bonus Employers will be able to claim a one-off payment of £1,000 for every employee they have previously received... read more

Is your small business struggling to make a decent profit? Here are six little known profit holes.

With everything going on in the economy at the moment, there has never been a more essential time to take... read more

party time for small companies

Although there is no specific allowance for a Christmas party, or any other employer-provided social function, HMRC do allow limited... read more

Archives

Categories

  • Accounts
  • Brexit
  • Covid-19
  • Employee
  • Employer
  • News
  • Office News
  • Pension
  • Quick Bites
  • Scams
  • Self Employed
  • Tax Tips
  • VAT

We hate goodbyes...

Keep in touch and get the latest information

Just pop your email address in the form below to receive our newsletter and we’ll send a downloadable copy of the Making Tax Digital Fact Sheet and Action Plan direct to your inbox.

Where are we?

Appleleaf Accountancy and Tax Limited,
5 Town Hall Street, Grimsby, North East Lincolnshire, DN31 1HN

Get in touch!

01472 287387
info@appleleafaccountancy.co.uk
Facebook Twitter Linkedin
© Copyright Appleleaf | Privacy
Website by The Creative Agency
  • Main Menu
  • Top Navigation
  • Home
  • About Us
  • Services
    • Management Accounts
    • Accounts Preparation
    • Business Start-Up Support
    • Bookkeeping Services and VAT Returns
    • Cloud-Based Software Solutions
    • Payroll, PAYE and Auto Enrolment
    • Company Secretarial
    • Company Formations
    • Personal Tax and Tax Planning
    • Contractors and IR35
  • Testimonials
  • Advisory
  • News
    • News
    • Autumn Statement 2023
    • Spring Budget Report 2023
    • Autumn Statement 2022
    • Mini Budget 2022
    • Spring Statement 2022
    • Autumn Budget 2021
  • Client Portal
  • Get in Touch

Receive our newsletter to keep you up to date on the latest news, tax tips and a whole host of accountancy advice to help you and your business.

Name
johnsmith@example.com

Never see this message again.

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.OkPrivacy policy