Limited Liability Partnerships in 2023
Since 2003, Healy Consultants Group helps our multi-national Clients’ register Limited liability partnerships (LLP) in every country on the planet. The information below will help you understand the benefits of this entity:
What is an LLP?
- A limited liability partnership (LLP) is a hybrid of a limited liability company (LLC) and a general partnership (GP). The partners enjoy limited liability, but taxed as individuals;
- The LLP is legally tax exempt of corporation tax; but income tax is payable in the country of registration;
- Instead of shareholders, there are partners;
- Instead of directors, there are managers;
- Instead of a M&AA, there is a partnership agreement.
Advantages of an LLP
- In some countries, an LLP is legally tax exempt of all taxes including income tax and corporation tax and VAT and GST. Examples of such countries include UK, USA, Canada and Singapore;
- In most countries, it is faster to register an LLP than an LLC;
- The annual tax bill for an LLP is lower than an LLC; especially when the latter pays directors fees or pays dividends;
- In most countries, an LLC suffers corporation tax. Thereafter, dividend distributions suffer personal income tax, e.g. USA and Australia and India. Thus double taxation. The annual net profits of an LLP only suffer income tax;
- Global LLP’s are allowed to have corporate partners; thus supplying confidentiality and further limited liability;
- Annual net profits are distributed between partners in compliance with pre-agreed allocations in the partnership agreement; not in proportion to paid up share capital;
- In most countries, an LLP is not required to submit annual financial statements to independent statutory annual audit;
- In most countries, the paid up share capital is lower for an LLP;
- If required later, t is easy to convert an LLP to an LLC;
- Lastly, as mentioned, the income derived from the LLP is not taxed at the corporate level. Instead, the income is divided among the partners and is taxed at personal tax rates.
Disadvantages of an LLP
- In some countries, LLC’s enjoy more generous tax exemption brackets including Singapore and Ireland;
- In some countries, the tax bill for an LLP can be higher than that of an LLC; especially when the company neither pays directors fees nor dividends;
- It is easier to raise private equity and venture capital through an LLC.
Detailed comparison table contrasting LLC and LLP
In most countries LLP LLC Company limited by guarantee Suitable for international trading of goods? Yes Yes No Suitable for manufacturing? No Yes No Suitable for professional consulting services? Yes Yes No Separate legal entity from its owners? Yes Yes Yes The owners enjoy limited liability? Yes Yes Yes Corporate Income tax payable? No Yes Yes Must file annual financial statements? Yes Yes Yes Independent statutory annual audit required? No Yes Yes Must file a legal annual return? No Yes Yes Level of paid up share capital Low High N/A Stamp duty payable on transfer of ownership? No Yes No Can raise capital through shares? No Yes No Can act as a holding company? Yes Yes No Company secretary required? No Yes Yes Minimum number of partners/shareholders? 2 1 1 Can have corporate partners/shareholders? Yes Yes Yes Annual directors fees can be paid? No Yes Yes Regulated by the local Registrar of Companies? Yes Yes Yes Access to double taxation treaties? Yes Yes No Public register of partners/shareholders? Yes Yes Yes