Limited Liability Partnership VS Limited Company

Limited Liability Partnership VS Limited Company – A Basic Guide!

22/04/2022Business , Business Growth Ideas

Plenty of queries trigger your mind while you plan to set up your own company. An important one might make you wonder how you should plan the structure of your business. To choose the best structure for your business, you must learn a basic understanding of the popular structures like LLP (Limited Liability Partnership) and LTD (Limited Company). Also the Difference Between a Limited Liability Partnership and a Limited Company.

Before we delve further into the discussion, let’s find out about the points of discussion which include the following:

  • Limited Liability Partnership In A Nutshell
  • An Introduction to the Limited Company
  • The Difference Between a Limited Liability Partnership and a Limited Company
  • Final Thoughts


Limited Liability Partnership In A Nutshell

LLP which is an abbreviation of Limited Liability Partnership is known to exist somewhere in between a private limited company and a traditional partnership. It is designed in a way that puts half waypoint between the two.

A Limited Liability Partnership is a structure of the business that refers to a partnership between two individuals. Let’s take the example of two solicitors who plan to go into partnership with each other. This will make them inclined not to opt for the hiring and recruitment of several employees. This will more likely be a small-scale practice.

Moreover, this is important to know that a Limited Liability Partnership is not favourable for all the business ideas. If the structure suits your business needs, there are chances to get benefits from a partnership. This will also limit your business exposure in several ways.


An Introduction to The Limited Company

When we talk about a limited company, it refers to a business structure that is designed in a way that makes it separate from its shareholders and owners. There are managers involved to carry out the business and they are normally called the directors.

It is mandatory to get it incorporated at the Companies House in the UK.


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Difference Between Limited Liability Partnership and Limited Company

In general, both Limited liability Partnership and Limited Company share several features that are similar in nature. The similarities include the incorporation requirement at the Companies House as well as a higher filing and reporting system.

However, there exist many features that make both of the discussed structures different from each other. A few prominent and major differences are jotted down here for you which include the following:

  • The limited company is limited by the factors like guarantees and shares.
  • A limited company is bound to pay corporation tax for whatever profit it earns.
  • Limited companies are required to have a registered address in the UK and a bank account.
  • A limited company is allowed to give dividends to its investors as well as sell its shares for the sake of profits.
  • Setting up a limited company can be done by taking yourself as a director or as a major shareholder.

On the other hand:

  • The set up of a limited liability partnership will require two individuals at least.
  • Shareholders have limited liability in Ltd whereas the partners in the limited liability partnership agree on such terms and are not as bound as in Ltd.
  • It is not allowable to sell shares in a limited liability partnership, neither they can receive capital.
  • The structure of an LLP is enough flexible in nature and the changes can be made if required at any time.


Final Thoughts

Now that you have developed a better understanding of the Difference Between a Limited Liability Partnership and a Limited Company, we can sum up the discussion by saying that it is the requirement of your business need that will help to choose the right structure for carrying out the business.

We hope these few minutes of reading will help you decide the best structure to carry out your business with seamless processing. Making the right business decision on the initial level means you are already halfway to making it a successful business journey.


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Disclaimer: The information about the Difference Between a Limited Liability Partnership and a Limited Company provided in this article is general in nature and does not intend to disregard any professional advice.

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