The primary purpose behind the establishment of Limited Liability Partnership (LLP) in England was to provide partners with the ability to combine a flexible organizational structure with transparent taxation and limited liability for obligations. This objective was achieved by granting legal personality to the LLP, effectively separating the personal assets of its members from those of the partnership. Each member’s liability is limited to the capital they contribute, and there is no requirement for a minimum capital amount specified by law. Unlike other structures, the LLP is a legally recognized entity with limited liability, and any contractual agreements are made directly with the partnership rather than the individual members.
Main Advantages in International Financial Planning
The LLP offers several key advantages in international financial planning. It enjoys legal personality and can be formed by at least two founding members, who can be individuals residing anywhere in the world or legally registered entities in the UK or elsewhere. The liability of the members is limited to the capital invested in the partnership. In case of insolvency, members can be held directly liable only in specific circumstances outlined by UK legislation, such as negligence or breach of trust. Unlike other business structures, an LLP does not require a board of directors, as each member actively participates in the management and decision-making processes unless otherwise stipulated in the partnership agreement.
Examples of Benefits You Can Have with a LLP
The operations and internal dynamics of the LLP are governed by the partnership agreement, which does not need to be registered. The partnership itself must be registered with the UK’s Companies House. While proper accounting records are mandatory, an audit is required only if the partnership’s turnover exceeds one million pounds. At least one member is designated as responsible for maintaining accurate accounting records. An LLP has the flexibility to enter into contracts and acquire properties both in the UK and abroad, making it an ideal choice for international business activities.
Why your business must consider the advantages of operating with a LLP
Considering the transparency of the UK’s taxation system, LLPs offer significant advantages in international financial planning. Non-UK resident members who conduct business outside the UK and generate income from non-UK sources are not subject to taxation in England, as these profits fall outside the scope of UK territorial taxation. UK resident members, who are not domiciled in the UK and operate their businesses outside of England, can also benefit from tax exemption until the funds are remitted to the UK. By utilizing an LLP, individuals or foreign entities can effectively plan their taxes by declaring profits in their respective countries of residence.
A strategic combination of an English LLP and an offshore company, with predetermined participation percentages and operations focused abroad, can result in substantial tax savings and a highly advantageous tax position.