LLP formation – what you need to know

A Limited Partnership (LP) is a form of General Partnership, where the partners have the flexibility of organizing the company’s internal structure, but still avail of the benefits of limited liability. In this business structure, one dominant partner runs the business and the multiple ‘limited partners’ make contributions to the partnership in the form of products, services or cash. If an LLP runs into financial bad weather, the general partner has no protection. However, each of the ‘limited’ partners is independent of the liability caused by the actions of other partners. Thus, the LLP structure limits the personal liability of each of the partners for any errors caused by omissions, negligence or incompetence of the employees or other agents involved in the business. For tax purposes, the government recognizes the LLP as an association of co-owners. Each partner or co-owner is taxed to the extent proportional to their share of profits. This is in contrast to the structure of a partnership, where all the partners are liable for any debt incurred by the company. It is to avoid this element of high risk that many people turn to LLP formation.

An LLP must have at least two members, and the rights and duties of all these members are given in the “Deed of Partnership”. Before LLP formation, the company would have to select a “Designated Member” who is responsible for all correspondence with Companies House. This member would also be responsible for supervising and preparing accounts and acting on behalf of the LLP, if it were dissolved in the future.

LLP formation is somewhat similar to other forms of business incorporation. There are two ways in which you can go about the formation of your LLP. You may enlist the services of one of many business start-up agencies who have qualified formation agents. They will guide you through the process of LLP formation, collect all required documentation and advise you regarding tax planning of the company. Currently, Companies House charges £20 for LLP formation. However, if you opt to go for the services of formation agents, they will naturally charge you extra.

It is easier to make use of the services of a formation agent because, LLP formation has a number of rules pertaining to choice of names, the use of sensitive words and expressions, the need for different approvals from recognized authorities and the disclosure of information. At the time of LLP formation, the members of the company should draw up a Deed of Partnership, which is a legally binding agreement that lais out in black-and-white all the responsibilities of each of the partners. This deed would also contain valuable information like the address of the members, their names, amount of capital invested by each of the members and their roles in the company.

One of the constraints of LLP formation is that it is not possible for interested parties to buy an off-the-shelf limited liability partnership, as you can with a limited company. This is because the old the set of documents that need to be submitted to the Companies House has to contain the names of the partners who are present at the time of incorporation. The registration form must contain the following details:

• the name of the LLP
• the location and address of the registered office
• the name and address of individual members of the company at the time of incorporation
• the name of designated members

Limited Liability Partnership Registration

When starting a business you might want to consider a Limited Liability Partnership (LLP) structure for your proposed business. An LLP is one of the newest and most attractive forms of business entities available to entrepreneurs today.

As the name suggests, a Limited Liability Partnership protects the business partners from personal liability for outstanding obligations in business. This is where an LLP is different from general partnerships. In a general partnership, each partner is held personally liable for the company’s debts. So, if the business is sued, each of its partners are equally liable for the debt; which means that even if you invested only 10% in the business, your liability is 100%. That is the reason why many businesses avoid general partnerships, if they can help it.

In a Limited Liability partnership, each partner is limited only to the extent of their investment in the partnership. Thus, their personal assets are far more secure in this kind of a partnership. Since each country has a slightly different law governing LLP’s, the liability of the partners involved changes from place to place. In general, a partner of an LLP is not responsible for any debts, financial obligations, or liabilities another partner may have incurred due to their negligence, misconduct pr wrongful acts.

Many countries extend the liability protection only against negligence claims. What this means is that a partner can be personally liable for other claims, such as contract claims. Another topic discussed by the law is the profits. The profits earned by the limited liability partnership are distributed evenly among the partners. This distribution is for tax purposes as the partnership is not taxed separately. When the partnership is taxed as a whole and not separately, it avoids double taxation which often happens to large corporations.

Registering a limited liability partnership costs less because you do not need a lawyer to register any business as an LLP. This is very useful for small businesses that are short on cash and time. Thus, tax advantage, cost reduction and limited liability are the defining characteristics of an LLP. Additionally, a Limited Liability Partnership has more flexibility when it comes to developing ownership structure. This is because unlike the general partnership where every partner has equal rights, in an LLP, there is one designated member. The other partners are not actively involved in the running of the business. Reporting requirements are also comparatively less when it comes to LLPs.

If you are in a partnership, you can opt to change it to a limited liability partnership by registering with government authorities and fulfilling certain requirements. You will be required to provide proof that the partnership has enough assets to cover any claims and that it has obtained adequate liability insurance. Aside from the proof of assets, businesses must also pay a registration fee in order to become a Registered Limited Liability Partnership or LLP. Professional partnerships like lawyers, dentists, engineers, accountants and the like must register as Professional Limited Liability Partnerships. In any case, these professionals prefer limited liability partnerships because they limit the liabilities of partners who are innocent of negligence and any other form of malpractice.

Private Limited Company Formation

Before you decide to make your company a private limited company, it is important to understand what a private limited company is and what its advantages are.

A private limited company is a registered company having 2 - 50 members. This structure ensures that have limited liability, corresponding only to the extent of their investment in the company. Therefore, members will not be held personally liable for the total loss incurred by the company. However, a private limited company cannot invite common people to subscribe to the shares and debentures of the company.

Thus, a private limited company has a distinct legal existence. It is easy to form and organize. This is because there are certain exemptions at the time of private limited company formation. For example:

• A private limited company is not required to file a prospectus with ROC.
• A private limited company does not need to obtain the Certificate of Commencement, which is generally required when a business starts.
• A private limited company does not have to hold a statutory general meeting.
• A private limited company is not required to file statutory reports.

Furthermore, the company has a long span of existence because according to the law, the company will continue to exist even if all its members no longer existed. Does the three most important benefit of a private limited company are less stringent legal restrictions, continued long-term existence and limited liability to its members.

Before actually getting into the process of private company limited formation, the entrepreneur needs to select a suitable name for the company. However, in the UK, the government does not allow to businesses to have the same or similar names. Therefore, it is necessary to check out the availability of the chosen name. It is also important to comply with rules pertaining to the use of sensitive words and expression while choosing a name. Some of the words that are considered to be sensitive include “bank”, "fund management", "insurance", "investment funds", "loans" and "reinsurance”. These are only some of the terms that are considered to be sensitive. Restricted names require approval from a government authority or a license before the name can be implemented.

This is followed by the submission of the Memorandum and Articles of Association. The company is also required to submit a Declaration of Compliance and a statement comprising of the name and address of the first company secretary and directors. These forms contain important information regarding the physical location and address of the company in the UK.

Since in the process of public limited company formation is an intricate one, many entrepreneurs prefer to hand over this process to a business start-ups service or formation agent. These agents have ample experience in the processes involved in business incorporation. Ample experience ensures speedy, error-free approval. Many of these services also provide sound advice regarding the benefits of certain company structures and how the structure of your company can be utilized to attract maximum tax benefits in the UK.

Benefits of an off the shelf company

In the not so distant past, anyone who wanted to form their own company (or incorporate a company) had to wait for a long time before they could get their company incorporated. This is because creating companies take a lot planning, strategizing and time. However, not all of us have the luxury of time. Most businesses cannot afford to wait for several months or a year before they can form a company. For pressing financial reasons, entrepreneurs often find themselves needing a company as soon as possible. This need and urgency, coupled with an easy online system of registration has created a whole new option for entrepreneurs called off the shelf companies. The creation of off the shelf companies has made a huge difference in the way people form companies. This facility makes it easy and quick for anyone who wishes to own a company in a hurry.

An off-the-shelf company, very loosely defined, is a legally formed but incomplete company. This means that the company has fulfilled all its legal requirements to become registered except for the appointment of its directors. Off-the-shelf companies are available for sale and bring the purchaser the convenience of transforming the company with ease and at a very low cost.

Many company formation agents ‘pre-create’ companies and keep it with them for the use of businesses that need a company urgently or inexpensively. This made it possible for people to acquire a company as and when needed.

Buying an off the shelf company is very easy. First the off the shelf company provider must transfer all of the shares of the company to the buyer. Second they must allow the current directors of the company (if any) to resign in order for the new directors (usually the buyer and/or its appointed directors) to take control of the off the shelf company. After this, the newly appointed directors have all the power to direct the company, manage its assets and take control of its funds. During this time, the buyers may wish to keep the company name under which it has been originally registered or change the name to a new one, which is more in keeping with the nature of their business.

However, with the arrival of online company registration services, it is no longer necessary for businesses to wait to create a new company. So, there is less demand for these off the shelf companies. One of its major drawbacks is that these shelf companies provide much less flexibility to owners than companies that have been custom built around their needs. Even so, one cannot discount the benefits of this option. Off the shelf companies make it very convenient for businesses to become incorporated. There is fewer administrative hassles and expenditure in the creation of the new company when compared to purchasing a ready-made company if you find a shelf company where you do not need to change anything much. In that case, all you may require is possibly change the name of the company, transfer shares and pay stamp duty on the shares transfer.

How to Register Your Company in the UK

Forming your own company could be a dream come true for many people. However, jumping into the process without proper understanding can lead you to waste time and money through unnecessary delays and returned paperwork. So, if you have decided, after some amount of evaluation, that incorporating your business benefits your business, then it is time to learn a little more about how to register your business in the UK. Whether you intend to carry out the registration yourself, or outsource the work to an online business start-up agency, knowing the steps involved will keep you one step ahead in the game.

First of all, you will need to decide on a name for your company. You need to choose a name that is available, as no two businesses are allowed to have similar name in the UK. You can check out the availability of names from the list of names that can be found at the website of Companies House. Then, you also need to decide on the structure of your company. For this, you may enlist the services of an accountant or an attorney, who can guide you on what business structure is most suitable for your business and can bring you the most profits. After that, it is time to get your hands dirty!

From the Companies House website, you will need to download Form 10 and Form 12. You will also need to purchase The Memorandum of Association and The Articles of Association from a Legal stationer. Now you have everything to get you started.

The first form (Form 10) basically collects information regarding the location of the Registered Office and details regarding the Company Secretary and Directors (if any). In this context, it is important to remember that your company would require a physical address in the UK, before it can be incorporated. This is the address to which all important papers relating to your business will be sent. If you do not have an address in England, Wales or Scotland, you may ‘rent’ an address from an agency or a solicitor, who will allow you to use their address for all communication, on the payment of a small fee. However, keep in mind that you will be responsible for your documents that reach this address.

In Form 12, you will find the Declaration of Compliance and the Companies Act 1985, both of which are important in respect of registering your company in the UK. You can keep this form aside at first and move on to the Memorandum and Association of articles.

The Memorandum of Association states the company’s name, physical address, the objectives of the company and its liability. The Articles of Association, which collects details regarding the internal management affairs and running of the company. These are important documents, and you must fill them in precisely so as to avoid errors. Once you fill these up, you must take these forms to a Solicitor, and sign Form 12 in their presence.

Once you have completed these four documents correctly, you may submit the finished documents to Companies House and pay the relevant filing fee. Before you submit your papers, check all the documents once more. If you want the registration to take place in a day, mark the envelope addressed to the ‘New Companies Section’ with “SAME DAY INCORPORATION” typed on it in bold print.

Company formation in UK – What you need to know

Forming your own company is a milestone in life. It is a measure of your achievements thus far. Forming a company changes the way you operate, and it alters your thinking. It puts you in the league of potential bigwigs, and forms the basis of future achievements. Thus, it will change the way you spend money, the way you make decisions and the way you socialize. Undoubtedly, forming your on company will be one of the most demanding challenges you are like to take on.

So, if you are on the verge of becoming your own boss with the freedom to work when and where you want, then you must also have put in a lot of thought into the actual process of company formation. The procedures involved in the formation of a company vary according to the country you want to set up shop in. In this article, let us talk about company formation in the UK.

Company formation in the UK is also known as company registration. The procedure is quite easy, particularly if you take the services of one of several business start-up services. In fact, it may surprise you to know that a large percentage of companies formed in the UK these days are put up electronically!

But before you can start, you have to first decide whether you need to form a limited company, a partnership, an off-the-shelf company or something else. Your business start-up service will guide you regarding the pros and cons of each of these, in case you are not sure about what type of business you should opt for. Every business has certain advantages and disadvantages. For instance, while sole proprietorship is the simplest way to set up your own company, you should keep in mind that the proprietor is personally held liable for any debts and obligations your business incurs. On the other hand, forming a partnership may be cumbersome since partnership agreements have to be drawn up but they may suit your tax needs in the long run. So, decisions such as these have to be taken after serious thought.

After you have decided on the type of company you want to own, company formation in UK is relatively fast. Simply choose a name and you are ready to go. If you are incorporating your company online through online business start-up services, you can check the availability of your chosen company name instantly. These services will also educate you on restrictions on name, if any.

One of the greatest advantages of going to the experts when you are ready to form your company is the ease with which the process proceeds. Online companies that help you form your company will guide you regarding the documents you need to submit, the licenses you may require, whether you need to acquire consent from the authorities etc.

Due to the sheer volume of expertise that servicing companies possess, if you form your company online, you could own your company and get it ready for business in a matter of hours (minimum) to 4-5 days (maximum), depending on the approval from Companies House. So, you can leave the hassle of company formation to the experts while you focus on what you do best – your business!