If you are considering registering a Limited Company or an LLP, here are 5 essential differences to consider when making your decision.
1. Number of members
- A Limited Company only needs one member (you)
- A Limited Liability partnership needs two.
2. Liability of Members
- In a private Limited Company, the liability of members is limited to the unpaid amount on shares.
- In an LLP, liability is limited to the amount of capital agreed to be contributed by the partners in the event of winding up of the partnership.
3. Investment into the business
- With a Limited Company, outside investors may contribute loans or share capital and take an equity stake, without having to become a director of the company.
- With an LLP, outside investors may only contribute loan capital. Only members may take an equity stake; outside investors may not.
4. Taxation
- Corporation Tax is applicable to a Limited Company, while individual members are taxed in a Limited Liability Partnership.
- Capital Gains Tax is to the company and shareholders in a Limited Company, while in an LLP, CGT is applicable to members, but only applicable to the company in the case of insolvency.
- PAYE is applicable to directors in a Limited Company, but not to members in an LLP.
5. Changes
- Making certain changes, for instance the alteration of the capital structure or the transfer of shareholding is much easier with a Limited Company, compared to an LLP.
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