In this article we’ll have a look at two different forms of businesses structures: UK LLP vs Ltd. The Limited Liability Partnership and the Limited Company. Both are business structures registered in the United Kingdom.
We will discuss what each of these structures are as well as their key differences.
What Is a UK LLP?
A Limited Liability Partnership is a legal business structure according to the laws of the United Kingdom. The LLP was introduced by the Limited Liability Partnerships Act 2000.
The legislation describes the LLP as follows: “a Limited Liability Partnership is a body corporate (with legal personality separate from that of its members) which is formed by incorporating under this Act.”
What Is a UK Ltd?
A Limited Company is another legal business structure according to the laws of the United Kingdom. The Limited is governed by the provisions of the Companies Act 2006.

Key Differences between UK LLP and Ltd
You already got a brief description of what those two company types are. Let’s now take a more practical approach to check the key differences between a UK LLP and a UK Ltd.
Tax Rules
One of the important elements driving your decision for a business setup will be guided by the tax rules that apply.
Taxation of a UK Ltd
A Limited or Limited Company is a separate corporate entity from a tax perspective. Therefore, the Limited will have to pay corporate tax in the United Kingdom.
The general corporate tax rate in the UK is 25%. However, companies with a profit of GBP 50.000 or less pay 19% instead. If your profits ranges between GBP 50.000 and GBP 250.000 the rate steadily increases to reach the 25% on everything above GBP 250.000.
If you set up a UK Ltd but you run your business from abroad, you want to watch out you don’t create a permanent establishment. This could subject you to corporate taxes outside of the UK.
By setting up a legal entity like a limited you can also decide how you want to take money out. You can take out a salary as an employee or director of the company on the one hand. On the other hand, you can also pay out dividends to yourself as the shareholder. This gives you the option to optimize for taxes depending on your particular situation.
Taxation of a UK LLP
Contrary to the Limited, an LLP doesn’t pay corporate tax as it is transparent for tax purposes. Therefore, the income is attributed to the partners of the LLP.
Consequently, the partners need to report the income in their tax return and possibly pay personal income tax on it.
In this case, it will be even more important where you as a partner have your personal tax residence. You’ll need to check the rules of this country to assess the tax consequences on your personal level.
Liability Protections
If you want to incorporate a company you’re maybe not only looking for tax efficiency but also for liability protection. Let’s see how the UK LLP vs Ltd compare on this criteria.
Liability Protections in a UK Ltd
A UK Limited offers liability protection. Therefore, your personal assets are protected from business debts.
This can be important if you run a business in a sector where your customers could you hold you liable if anything goes wrong because of the work you did for them.
Liability Protections in a UK LLP
As we call this legal setup a Limited Liability Partnership it should be quite clear you can benefit from limited liability.
So, also in this case, your business debtors can only come after the assets of the LLP and not after your personal assets.
Structure and Ownership
How does the structure and ownership of a UK LLP and UK Ltd look like?
Structure and Ownership in a UK Ltd
We call the owners of a UK Limited shareholders. There can be one shareholder or multiple shareholders who will own the company. If the company makes a profit it can distribute a dividend to these shareholders according to the shares they hold.
Furthermore, the Ltd needs to have at least one director. The director manages the company’s daily operations.
The shareholder can at the same time be the director. So, if you are the only person involved in the business you can take up both roles.
Structure and Ownership in a UK LLP
A Limited Liability Partnership doesn’t have shareholders but it has partners or members instead. Because it is a partnership, you need at least two partners.
You won’t appoint a director for an LLP. Instead the partners will agree which rights and duties each partner has. They write these down in the LLP agreement.
The partners can also freely decide on how they want to divide the profit of the LLP.
Compliance and Reporting Requirements
Both entities will have to make sure they meet the necessary compliance and reporting requirements.
Compliance for a UK Ltd
A UK Ltd will need to put together annual accounts including a balance sheet, profit and loss statement as well as some additional notes.
Furthermore, you will need to file a corporate tax return with HMRC.
If your company falls under the scope of VAT, you’ll also need to adhere to the filing requirements in this respect.
In addition, you also need to file an annual confirmation statement with Companies House. In this statement you confirm that the registered information about the company is still up to date.
Compliance for a UK LLP
A UK LLP will also need to prepare and submit annual financial statements, just like a Ltd.
The UK LLP doesn’t pay corporate taxes. Accordingly, the LLP doesn’t need to file a corporate tax return.
However, as a partner of the LLP you need to assess your tax and compliance obligations on a personal level. These will depend on your country of tax residency.
The LLP could also be subject to VAT. In that case, you can’t forget to file VAT returns.
Furthermore, LLP’s also need to file an annual confirmation statement.

Setup Process and Costs
How does the setup process look like and what costs can I expect to pay?
Setting Up a UK Ltd
I would encourage you to read my dedicated article in order to have a full overview of the steps of setting up a UK Ltd.
The incorporation will set you back around GBP 1.000 and another GBP 750 for the annual compliance. Although the costs will vary depending on your needs.
Setting Up a UK LLP
For more information about setting up a UK LLP, I refer you to my dedicated article.
The prices to set up and run a UK LLP on an annual basis will be more or less similar to those of a UK Ltd.
Choosing between an LLP and Ltd
So, what’s your choice between UK LLP vs Ltd? I would say it should all depend on your situation and what your goal is.
Form a tax point both are quite different. But you wouldn’t only want to focus on the tax side of things and also take into account the other elements we discussed.
If you need personalized advice, you can always reach out to me.