Partnerships and Limited Liability Partnerships LLPs are both business structures that allow two or more individuals to come together and operate as a single entity. There are, however, some key differences between the two that businesses should be aware of before choosing which structure is right for them.
One of the main difference between partnership and LLP is the level of liability each business owner faces. In a partnership, each partner is liable for the debts and obligations of the business. This means that if the business owes money or is sued, the partners’ personal assets could be at risk.
In an LLP, each partner’s liability is limited to the amount of money they have invested in the business. This protects the partners’ personal assets from being used to pay off the business’s debts.
Another difference between partnerships and LLPs is the way they are taxed. Partnerships are not separate legal entities, so the business itself is not taxed on its profits. Instead, the partners are each taxed on their share of the profits.
LLPs, on the other hand, are separate legal entities and are subject to corporation tax on their profits.
Partnerships tend to be less expensive to set up than LLPs and they may offer more flexibility in terms of how profits are distributed among the partners.
LLPs tend to offer more protection for the partners’ personal assets and may be a better choice for businesses that are looking to expand or raise investment.
Deciding whether to set up a partnership or LLP is a decision that should be made with the help of a qualified tax advisors. They can advise on the best structure for your business, taking into account your specific circumstances and goals.
Our qualified tax advisors can help you decide which business structure is right for you and guide you through the process of setting up your partnership or LLP. We can also help with ongoing compliance matters such as filing annual returns and ensuring you pay the correct amount of tax. Contact us today to find out more.