Embarking on a journey of building your own startup can be the most crucial decision you make all year. It is not just a matter of creating a company but also of deciding when you want to run it by yourself or have partners running it with you. A Limited Liability Partnership is a business structure in the UK that enables one of the partners to have unlimited liability in the company while the other partner might have investment without being liable in the business.
If you are just starting, LLP can be a good option in order to establish a small or medium-sized business. However, like all kinds of business programs, Limited Liability Partnership also has its share of pros and cons. Here they are!
Pros of A Limited Liability Partnership
Being in a Limited Liability Partnership can get you the following benefits:
- You and your partners can ascertain the terms of the contract as well as the share of profits and how it will be carried out. Therefore, things are rather flexible when you opt for an LLP, and likewise, you can decide the course of action when it comes to the management of the company.
- Another advantage of registering your company as an LLP is that the name you register it with will be solely yours. Therefore, when you register it at the Companies House, no other company or partnership can use the same name as yours.
- When it comes to an LLP, the company can appoint two other companies as members. That is not the case in a Limited company as it requires a minimum of one director as an actual individual. Therefore, LLP offers a certain level of privacy to the members of the company, and their identity remains hidden for as long as they wish.
- When it comes to a limited partnership company, it is possible to seize the personal assets of a partner in order to settle the debts of the partnership. However, in an LLP, the personal assets of the members are separated and protected from any of the liabilities of the business.
- The members of an LLP can avail countless tax benefits as they considered to be self-employed individuals as partners in a business partnership.
- Having a company registered as an LLP allows its partners to rent, lease, or buy their own property. In addition to that, they can also enter into agreements or employ staff under this program. On the contrary, if your company is registered as a regular Limited Partnership, all partners will be required to sign specific documents that will be under their own names.
- If a member of an LLP resigns, goes bankrupt or suddenly dies, this does not mean that you have to dissolve all business activities as well as the company. Trading can continue in an undisrupted manner despite the difficult period.
Cons of A Limited Liability Partnership
And here are some disadvantages of an LLP that you might want to consider:
- Public disclosure is a fundamental con of Limited Liability Partnerships as well as a Limited company. Since you must file all your financial documents at Companies House, everything is public record, and hence, there is no real privacy quotient here. These accounts also continually update the income of the partners, which can be a rather severe invasion of one’s privacy.
- An LLP can only run with two or more members. This means that when you get into a Limited Liability Partnership with one or more people, you must ensure that they have no intention of leaving the partnership. Otherwise, it could mean a dissolution of the company altogether since it is not possible to run an LLP with a single person.
- Incorporating an LLP can be a bit more expensive than establishing a regular partnership company as an LLP requires extra reporting and accounting requirements.
Let Us Make Things Easy for You!
The first step to building your own startup is to envision where you want it to go in the future. In addition to that, it is essential to know with clarity whether you wish to run the company solely or run it with a few partners who have the same company goals and vision as you do.
If, after careful consideration, you do decide to register your company as a Limited Liability Partnership, rest assured, you will be able to use all the help you can get to adhere to the legal and taxation compliances set in place by the UK government. This is precisely where Target Accounting enters the picture to provide you with expert guidance.
We specialise in accountancy and financial advice where startups are concerned. We offer tailored solutions to your specific business needs to ensure everything is a smooth ride with your decision to register as an LLP.