The UK attracts entrepreneurs with many advantages for doing business, including a stable economy, favourable tax climate, and free access to the European market. Another obvious benefit is the wide range of types of companies that can be registered in the country. Among them are different types of partnerships, public and private companies, and there is also the opportunity to work as a sole trader. If you are considering registering an LP and are looking for a London virtual office address provider, this article is for you. You will learn about the benefits of registering a limited partnership in the UK.
Advantages of Registering a Limited Partnership In The UK
Before understanding why it is most profitable for an entrepreneur to register an LP in the UK, it is worth considering what type of enterprise it is.
Limited Partnership is a business association founded by:
- one or more general partners who make management decisions and bear unlimited liability for the company’s obligations;
- one or more limited partners who do not control the business but whose liability is limited to their investment in the business.
Partners who have established a limited partnership can be individuals or legal entities.
LP (Limited Partnership) and LLP (Limited Liability Partnership) should not be confused. An LLP differs from an LP in that the liability of all participants is limited to the contributions made to the business.
Entrepreneurs who decide to open a business in the UK often prefer LP, since this legal form of enterprise provides them with certain advantages:
- Founders of limited partnerships are not required to report information about their beneficiaries to the Companies House. Thus, the UK provides the opportunity to register an anonymous company.
- Minimum requirements for founders. Any individual or legal entity can create an LP, regardless of their citizenship, residence, and location.
- Ease of company management. A Limited Partnership does not provide for the positions of secretary and director – the company can be managed by a general partner or any trustee authorized to represent the interests of the company.
- Tax transparency. It lies in the fact that Limited Partnerships in the UK – with the exception of SLPs – are not taxpayers. All profits received by the company are distributed among partners who pay taxes at their place of residence.
- Possibility of complete tax exemption. If the LP’s founding entity is registered in a tax-free area and does not operate in the UK, it is fully exempt from paying tax.
- Simplified reporting system for foreigners. Financial statements must be prepared by all limited partnerships without exception. However, if the general partner of the LP is a foreign company, there is no need to submit them to Companies House.
Of course, other forms of doing business may be more profitable for other businessmen. There are advantages to both being a private limited company and a sole trader
What Conditions Must Be Met When Registering an LP In The UK?
UK legislation allows non-residents to register Limited Partnership enterprises, but it is important to meet certain requirements:
- To establish a Limited Partnership, you need at least two partners, one of whom is general, that is, bears unlimited liability for the company’s obligations.
- Partners may be nominees.
- The LP must have a registered office in the UK. This is the address for receiving official correspondence – for example, from the tax or customs service. You can get a prestigious virtual office address in London by contacting The Hoxton Mix.
- Limited partners have no right to interfere in the management of the company. For example, to authorize the conclusion of any agreement. If they do not comply with this rule, their limited liability is automatically terminated by law.
- Each partner must register as a separate taxpayer.
- The maximum number of partners and LP participants is not limited.
Next, we will dwell in more detail on the requirements for documents and data that entrepreneurs registering a limited partnership must provide:
- ID card of the manager and beneficiary;
- documents confirming the place of residence;
- the names of all partners, as well as the details of one of them chosen to be responsible for receiving notifications from HMRC;
- actual address and telephone number, if they differ from the legal one;
- the nature of the activities that the company plans to carry out;
- the official name for Limited Partnership;
- date of commencement of the company’s operation.
Possible Difficulties When Creating an LP Company
There are undoubtedly benefits to registering as a Limited Partnership, however, as with any business, there may be some challenges along the way. It is better to learn about them in advance to easily overcome them, or better yet, prevent them.
The need to choose a jurisdiction. Each of the countries that make up the United Kingdom has different legal systems. Before registering a company, you will have to decide where exactly you want to open a business – England, Wales, Scotland, or Northern Ireland. Remember that Scottish LPs are different from those in other countries, so always consult with experienced lawyers before registering a firm.
It is impossible to obtain tax resident status for an LP whose partners are all non-UK residents. This leads to a certain problem – such a company cannot take advantage of the absence of double taxation. However, the problem resolves itself if you do not plan to operate in the UK.
The company must have a legal address in the UK. Physically, your company can be located in any other state, but a legal address is necessary to receive official correspondence – without it, it will not be possible to register an LP. London virtual business address is an excellent choice for responsible businessmen who strive for prestige
Conclusion of a partnership agreement. When creating a Limited Partnership, partners are required to enter into an agreement that clearly states the rights and obligations of each of them. Before drawing up such a document, it is necessary to think through each of its points, because if one of the partners is not satisfied with something, his signature will not be received, which means the enterprise will not be created. Also, in the future, violation of the deal can lead to serious problems, including the complete collapse of the business.
Final Thoughts
Limited Partnership is a popular legal form of enterprise in the UK. The formation of such a company allows limited partners to maintain the integrity of their personal assets, and general partners to maintain confidentiality and the right to manage the business. If you are planning to register an LP, LLP, or PLC and need a legal address, we recommend contacting Hoxton Mix, which provides several advantageous virtual office plans, including with a legal address. In the blog, you can also learn more about sole trader or private limited company advantages and disadvantages.
