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Can you explain what is a difference between limited partnership

Customer Question

Hi, can you explain what is a difference between limited partnership and limited liability partnership. Thanks.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

Here is a definition from Wikipedia:

'In the United Kingdom limited partnerships are governed by the Limited Partnerships Act 1907. The UK government department of Business, Enterprise and Regulatory Reform (now the Department for Business Innovation and Skills) consulted in 2008 on proposals to modify and merge the Act with the Partnership Act 1890, but the proposals did not go ahead [1], and the 1907 Act remains the governing Act.

English law and Scottish law are distinct on partnerships.

In English law, limited partnerships are not legally separate entities: the partners are jointly and severally liable and any lawsuits filed are filed against the partners by name. There has been discussion over whether limited partnerships operating under English law should be made separate legal entities in the same way as limited liability partnerships are. The Law Commission report on partnership law LC283 suggested that creation of separate legal personality should be left as an option for the partners to decide upon when a partnership is formed. There were concerns that automatically making partnerships separate legal entities would restrict their ability to trade in some European countries and also expose them to different tax regimes than expected.'

Here is a definition from Investopedia of a limited partnership:

'Two or more partners united to conduct a business jointly, and in which one or more of the partners is liable only to the extent of the amount of money that partner has invested. Limited partners do not receive dividends, but enjoy direct access to the flow of income and expenses.'

A limited partnership is an individual concept for their own protection.

Limited Laibility Parnerships were created to protect individual partners from errors by other partners. Otherwise, in a traditional partnership they would be jointly and severally liable for all the partnership debts. Clearly for a big partnership a liability through the error of one partner could be collosal and bancrupt all the other partners hence the creation of the Limited Liability Partnership concept.

I do hope that I have been able to shed some light on your question.

Customer: replied 2 years ago.

do partners have to register for self assessment if they are citizens of another EU country?

what do you mean by 'enjoying direct access to the flow of income and expenses?'

Expert:  bigduckontax replied 2 years ago.

Only if they are liable for UK taxation by reason of residence in the UK. They will probably have to declare their partnership income in their own country.

A limited partner is a partner in all but name. He has access to all partnership activities, but his liability for partnership debts is limited.

Customer: replied 2 years ago.

can LLP be registered for taxies such as PAYE? Do partners need to obtain NI number in UK?

Expert:  bigduckontax replied 2 years ago.
Yes LLPs can, and frequently, are to pay their employees, not to mention VAT. A UK partner would certainly need a NI number, not necessarily a prtner not residing in the UK.
Customer: replied 2 years ago.

So I still can't decide to go LLP, LP or LTD if everything is more or less the same. In your opinion who goes for LLP instead of LTD and why ? What are the benefits and disadvantages of each other?

Expert:  bigduckontax replied 2 years ago.

Here is the NOLO Law for All definition:

'Limited partnerships (LPs) and limited liability partnerships (LLPs) are both businesses with more than one owner, but unlike general partnerships, limited partnerships and limited liability partnerships offer some of their owners limited personal liability for business debts.

In limited partnerships (LPs), at least one of the owners is considered a "general" partner who makes business decisions and is personally liable for business debts. But LPs also have at least one "limited" partner who invests money in the business but has minimal control over daily business decisions and operations. The advantage for these limited partners is that they are not personally liable for business debts.

The limited liability partnership (LLP) is a similar business structure but it has no general partners. All of the owners of an LLP have limited personal liability for business debts.'

Finally a Limited Company is a separate legal body from its shareholders. Although the company may fail, it does not bring down its directors or members unless a fraudulent preference has been allowed to occur.

Some professional groupings do not permit the Ltd company route, hence the creations and use of the LLP. The LP is an individual matter.