Business Services, Tax Planning

Would you benefit from operating your business through an LLP?

By RJP LLP

Would you benefit from operating your business through an LLP?

Limited liability partnerships (LLPs) are a special legal structure distinct from limited companies or partnerships. They provide the limited liability protection of a limited company with the tax treatment of a partnership. So whilst they are subject to many aspects of company law, for tax purposes they are treated as partnerships with members providing working capital and sharing profits.
Members who are individuals are liable to pay income tax under self-assessment, and self-employed Class 2 and Class 4 National Insurance contributions on their share of profits; members who are limited companies are liable to pay corporation tax on their share of profits.

Although LLPs are widely used by professions such as accountancy and law, they are not restricted to these professions. They are suitable for all kinds of businesses – professional, trading, or investment and are well worth considering if you have a partnership but don’t want to make the leap into running your business through a limited company.

What are the advantages of an LLP?

As with a limited company, LLPs allow personal assets to be protected, because the personal financial assets of members can be ‘ring fenced’ from business liabilities.

The limited liability protection afforded by an LLP can be restricted to an individual member only. For instance, if an LLP member gives a personal guarantee to a creditor (e.g. the bank) the creditor can only pursue that individual member in the event of a default; other members are not liable.

Any victims of negligence caused by an individual LLP member can only seek compensation from the relevant member to recover any losses as a result.

From a tax point of view, the tax due on profits from an LLP are considered the personal liability of members (like an ordinary partnership) and not a liability of the LLP.

LLPs provide more flexibility in relation to profit sharing than limited companies.

If you would like to discuss operating your business through an LLP, or wish to consider another legal business entity, please contact partners@rjp.co.uk.

How to get onboard with RJP

Talk to us

Have an initial discussion with a member of the RJP team to identify ways we can enhance your business's growth with our comprehensive support and strategic advice.

Hassle-free migration

Choose RJP and we'll smoothly manage all transitions, handling paperwork, coordinating with your current accountant, and ensuring no deadlines are missed for a worry-free experience.

A pathway to growth

Finally, we will send you the required documents to sign and return, leaving you to continue leading your business, backed by our abundant, responsive advice and support.

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FAQs

At RJP, we understand that keeping a finger on the pulse of your business's health is crucial. That's why we offer management reporting services—think of them as a regular health check for your company. These insights show you the real-time performance of your business, helping you make informed decisions to nurture and grow your enterprise.

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