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Types of business structures in the UK: Limited Company or LLP?
The very first step to starting a business in the UK is picking the right type of business. Each type has unique characteristics that may or may not fit your needs.
According to the official statistics published by the Companies House, there were nearly 5.5 million registered corporate bodies in the UK, at the start of 2022.
Impressively, limited companies (LTD companies) and limited liability partnerships (LLPs) together account for 93% of the total registers in the UK. Most investors – both local and foreign, aim for these 2 types due to their high degree of safety and tax efficiency.
So, if you’re still wondering what type of entity to incorporate in the UK, go for one of those two.
Limited companies and LLPs share many characteristics in common. However, some aspects of each are very different, namely taxation and classes of members.
Similarities between Limited Companies and LLPs
Both types of business entities have distinct legal personalities. Their members have limited liability.
Plus, they have quite the same compliance requirements. These are the reasons why most entrepreneurs aim to start a business in the UK. And, you should too.
Limited companies and LLPs are considered separate legal entities in the UK. This means the liabilities of each are separated from its owners. Each can enter contacts, and agreements, buy and sell properties, sue, and be sued in their names.
Liability of members
The members of limited companies or LLPs have only limited liability. They’ll not hold any further liability that goes beyond their owned shares or capital contributions. They’re shielded from all kinds of debts or liabilities caused by the company.
The directors and designated members must respectively ensure that their companies and LLPs comply with the following basic requirements:
- Maintaining corporate and accounting records
- Filing annual accounts with the Companies House
- Submitting tax returns with the Her Majesty’s Revenue and Customs (or HMRC for short)
- Sending confirmation statements (also known as annual returns) to the Companies House
Tired of sifting through endless paperwork to understand jurisdictions’ compliance requirements? Our guide can help!Try Now
Main differences between Limited Companies and LLPs
The main differences between the two types of business entities are their members and taxation.
Types of members
- Limited company: you must have at least 1 shareholder and 1 director to register a limited company in the UK. The company is owned by the shareholders and run by the directors.
- LLP: an LLP in the UK is both owned and run by partners. There is no cap on the number of partners. However, there must be at least 2 designated partners appointed at all times in an LLP.
- Limited company: a limited company in the UK is subject to corporate tax. The tax rate currently stands at 19%. It is imposed on the company’s total income earned from both domestic and foreign sources. When shareholders receive dividends from a UK company, they’ll be subsequently taxed on such income.
- LLP: an LLP is a “pass-through” entity for tax purposes. It means that an LLP itself is not subject to tax. The tax liability will be passed through the LLP to its members. They’ll have to pay tax on their income distributed from the LLP according to their tax statuses.
You’ll pay no tax at all in the UK if you’re a non-resident and receive only income from non-UK sources. Non-residents only pay taxes on their income which is generated from a UK source.
To choose the best type of business, consider your needs, where, and how you’re going to run your business.
When it comes to investing in the UK, 90% of the investors have chosen to form a limited company.
How to form a Limited Company in the UK
If you choose to register a limited company in the UK, here are the steps you can take to do so.
If you aim for an LLP, feel free to skip this section and move to the next one for guidance on registering an LLP in the UK.
Step 1: Choose a Company Name
Picking the name of your limited company in the UK can be tricky since there are several rules that you have to follow.
Rule 1: Be unique
Your company name cannot be the same as other registered names. In particular, your company name may be considered the “same as” name when there is only 1 difference between it and the existing name or trademark. The difference can be as small as:
- A punctuation
- A special character
- A word or character that has the same meaning as that of an existing name
- A word that is widely used for naming UK companies
You also cannot register a company name if someone complains that it is too similar to another name and the Companies House agrees with such a complaint.
For example, “Company’s Name Limited” may be considered the same as “Company Name Limited”. “Example For You Limited” may be considered the same as “Example 4U Limited”. In such cases, the Companies House will inform you and recommend to you what to do.
However, you can still register a “same as” name for the company if:
- Your company is in the same group as the company which has the existing name, or
- Your company gets a confirmation letter from the company that has the existing name, allowing your company to have the name.
Rule 2: Don’t be offensive
Your company name cannot be offensive. It should not contain any negative or sensitive words or expressions.
Rule 3: Get the permission
You may need to ask for permission in advance for certain words or phrases that may indicate a connection with the government or public authorities.
For instance, you cannot add the phrase “Home office” to the company name without approval from the UK Home Department.
Rule 4: Get the names right
Your company name must include the suffix “Limited” or “Ltd” unless it is a registered limited by guarantee or charity. You must include the company’s name on all signs, corporate documents, publicity, and letters.
Along with the official name, your limited company can have another name called the “business name”. It must:
- Not contain the suffix (“Limited or “Ltd”), and
- Follow the same rules as the official names.
Think of a name that well describes your business activity, is meaningful, and is easy to remember. Consider your domain for the company’s website, too. It would be best if your domain name matches your company name.
You may have a name in mind, but quite uncertain if it is available in the UK or not. For that reason, BBCIncorp offers a name check tool that can help you on the matter. Try it now!
Step 2: Use a service for the UK Company Formation
You can set up a limited company in the UK by yourself or with an incorporation service. The second option is highly recommended.
The paperwork and registration process will get complicated at times if you’re a newcomer or a foreigner.
An excellent service provider will not only help you cover all the incorporation requirements but also make sure everything always stays on the right track.
For your information, you have to satisfy the following requirements to form a limited company in the UK:
- At least 1 director (regardless of nationality)
- At least 1 shareholder (who can also be the director)
- An eligible company name
- A registered address in the UK for the company (this will be made public at the Companies House)
- A service address for the director, secretary, and person with significant control (this will be kept private at the Companies House)
BBCIncorp is at your service
BBCIncorp has 3 incorporation packages that can meet all of your incorporation needs. With our Basic package, we will provide you with a local address and service address. We’ll check the company name, provide the template for your company’s constitution, file the application, and take care of the registration process.
With our Standard and Premium packages, we’ll further help you get:
- A business address for the company’s base
- A set of physical certificates and documents
- VAT registration
Check out BBCIncorp’s UK company formation services.
Step 3: Pay for the service
You can pay for our formation services easily. Just click on “Get started” on the packages and log in with your email.
We have made our onboarding steps for payment easy-going, with clear instructions and a friendly user interface. Follow the instructions and you can quickly pay in just a few minutes.
As for the payment methods, you can pay via bank transfer or Paypal/Stripe with your debit/credit card. Once the payment is done, our employees will contact you for confirmation on the same day.
Step 4: Follow the KYC Procedure
Complying with the know-your-customer (KYC) procedure, our staff will actively contact you for the required information.
For setting up a limited company in the UK, you’ll need to provide us with the following:
- Certified copies of passports or identity cards of the shareholders and directors
- Other supporting papers (if needed) such as utility bills, driving license, debit/credit card statements dated within 3 months
- The proposed name of your company
- The details of business activity
Our employees may further ask you to supply additional information about each member (according to the government’s request), such as:
- Town of birth
- Mother’s maiden name
- Father’s first name
- Telephone number
- National insurance number
Once we gather everything needed from you, we’ll proceed to file the application and send it to the Companies House on your behalf. The Companies House is the official government agency that oversees the registration of all businesses in the UK.
Step 5: Get the result
When using our Basic package, you can expect to receive the digital certificate of incorporation and other documents in 1-3 working days (after your submission of all required documents).
As for our Standard package, you can expect to receive the physical set of those documents in 3 – 7 days. International fees will be covered by us so you don’t have to pay extra for this.
At this point, your company will have been successfully registered!
However, to start doing business in the UK, your limited company will need to subsequently open a bank account. You can skip the very next section (where we list out the steps to form an LLP) and move right to Section 4 (where we guide you through the steps to open a corporate account).
How to open an LLP in the UK
LLP is normally the best option for professionals who work in the same field.
They join forces to generate profits and build up an LLP to enhance the business image.
If you aim to form an LLP in the UK, this section is for you. We’ll show you exactly the steps to do so.
Step 1: Pick a name for the LLP
The first step is to think of a name for your LLP in the UK. The rules for naming an LLP are the same as a limited company. To be more specific, your LLP’s name may be rejected if it falls under the following circumstances:
- It is the same as or identical to the existing name or trademark (in simple words, it must be unique)
- The Companies House agrees with a complaint (from anyone) that the LLP’s name and another existing name are too alike
- It contains offensive meanings or sensitive words and phrases
- It implies a connection to a government agency or public authority
Your LLP’s name must include the suffix “Limited liability partnership” or “LLP” at the end of it. You must display the name on all signs, stationery, and promotional materials. If you have an online business in the UK, also make sure to include the name on all websites and channels.
Your LLP’s name should describe the business activity, easy to read and remember. Don’t forget to consider the domain of your website. It would be best for the domain to include the name of the LLP.
Step 2: Engage with the service of Professionals
To form an LLP in the UK, you’ll need to satisfy the following requirements:
- A local registered office address in the UK
- At least 2 designated members (who need to make sure the LLP complies with local regulations)
You’ll also need to set up an LLP agreement. This document is kept internally and does not need to be filed with the Companies House. However, it is best practice for you to make a written LLP agreement with every partner. Generally, it’ll set out the following matters:
- The duties and responsibilities of the partners
- How the LLP is run and managed
- Profit distribution method among the partners
- How a partner can join and leave the LLP
You can register an LLP on your own as long as you can fulfill all the requirements. If not, the suggestion is to aim for our LLP formation services. We’ll take on the hassle of paperwork and the registration process. With our help, you can quickly open an LLP without doing all the hard work.
BBCIncorp is at your service
With our LLP incorporation packages, we provide you with a registered address in the UK for your business and a service address for your LLP members. We gather the required documents from you (mainly the members’ details), file the application, and submit it to the Companies House on your behalf. We can also assist you in making an LLP agreement.
Step 3: Make the payment
If you aim for our formation service, then the next step is to make the payment. Just click on the button on the packages and follow the instructions on our website.
The onboarding steps for payment are straightforward with a user-friendly interface. You can pay via bank transfer or directly on the website with your debit/credit cards via Paypal or Stripe.
Step 4: Supply the required documents
Following the know-your-customer procedure, our employees will ask you to provide the following required information:
- The proposed name of the LLP
- The passports or other address proof of all members
- Other supporting documents if needed
Upon the receipt of all documents, we’ll start to file the application and submit it to the Registrar to form your LLP in the UK.
Step 5. Receive the result
The process of forming an LLP in the UK can be done within 24 hours. If you use our Basic package, you’ll receive a digital set of corporate documents. They include copies of the incorporation certificate, LLP agreement, and the business register.
For our Standard package, you’ll further receive a physical set of those documents, in 3 – 7 working days.
Opening a bank account for UK Companies
To start a business in the UK, your limited company or LLP has to open a corporate account to transact with customers or business partners. It is also the best way to separate business assets from your personal assets.
A company in the UK can open its bank account in another foreign country. There is no uniform application process for all banks. Each bank has different conditions to approve an application.
So, it can get complicated for you to apply for a bank account on your own (a heavy load of paperwork and a hassle process). The advice here is to get help from professionals.
Over the years, BBCIncorp has assisted many businesses all over the world to successfully open their bank accounts. If you have already aimed for our incorporation service, it’ll be most convenient for you to use our banking service.
Here are the steps you can take to apply for a bank account for UK company formation:
Step 1: Choose the Bank
You can use our banking tool to find what bank(s) is the best fit for your business. It only takes you a few minutes to answer several questions related to your business in the UK.
After getting certain recommendations from our tool, you can contact our staff to confirm the banks that apply to your business. They will further inform you about how the application process works and what you’ll need to prepare.
Step 2: Pay for the service
If you use our banking service together with our incorporation service, the fee will be $499 per only one application. You can make the payment the same way as when you pay for our incorporation service. Once we confirm the payment, our staff will reach out to you for order verification.
Step 3: Follow the KYC procedure
Subsequently, we will collect some necessary documents from you, complying with the KYC procedure. Generally, for a bank account application, you’ll need to provide us with the following documents:
- Certified copies of passports of all members of your limited company or LLP
- Copies of the business certificate of incorporation in the UK
- A business plan
- Business proof (business agreements or contracts for example)
- Bank statements and reference letter
These documents imply that your company or LLP is a legitimate business. Companies with shady businesses normally don’t get approved to open a bank account.
As soon as we get the documents from you, we’ll proceed to file the application and submit it to the chosen bank. Please note that, throughout the whole process, we may ask you to provide additional documents according to the bank’s request.
Step 4: Take part in an interview
If your application is approved, we’ll place an appointment for an interview between you and the bank. Many banks will require you to have a direct meeting at their places. A few other banks accept an interview via video call.
In case your application is rejected, the process will end here. If you order our premium banking service, we’ll start a whole new process for you with another bank (up to 4 additional banks), without any additional charge.
Step 5: Get the result
The whole process can take up to a couple of weeks. We will inform you of the result as soon as it arrives. Please note that the decision is made solely by the bank. We do not guarantee a 100% success rate for our banking service.
WISE: The best alternative to a bank account in the UK
If your company or LLP only has non-resident members, it’ll be really hard for you to open a corporate account with UK banks.
UK banks are likely to prioritize companies with residents and conduct their activities in the region. Furthermore, you’ll need to travel for a direct meeting, which is quite hard to do in the current global pandemic.
However, if you still want to get an account with a trustworthy provider in the UK, BBCIncorp has just the solution you need.
We have entered into a partnership with Wise (previously known as TransferWise) to bring you the best alternative option for a bank account: a Wise business account.
Although a Wise account is not a traditional bank account, it can function exactly like one. You can send money, in a borderless way, to more than 80 countries in the world. The account also allows you to hold and transact in 50 different currencies.
You can open a multi-currency business account with Wise right at your own home. The whole process of application is completely online.
Here is how it works
After your company is registered in the UK, we’ll send you a link to register your Wise business account, without charging any fee. We’ll further give you detailed instructions on how to do it.
Registering through our given link will inform Wise that you’re a customer from BBCIncorp. Your application will be processed faster with timely support.
PAYONEER: Another option for a global business account
Payoneer is a US-based business that provides financial and payment services. Having a Payoneer business account allows your UK company to receive money in multiple currencies from its worldwide customers. You can withdraw the amount to your local bank account or make payments in over 200 countries. The application process is also completely online.
BBCIncorp has also entered a partnership with Payoneer to bring you another option for a business account. We’ll send you a link to register your Payoneer business account after your company is formed in the UK. Registering through our link verifies that you are our customer.
This means your application will be put on a list of high priority, and you can also enjoy the exclusive benefits below:
- A $35 reward if you receive/ transfer more than $1,000
- Up to $500 cashback
- Free maintenance & account opening fees
- Fixed transaction fee at 1%
Contact our team now for timely assistance!
Notes on post-incorporation in the UK
You can start your business in the UK after forming your company (or LLP) and getting a corporate account. Here are a few more things you’ll need to do when running your company in the kingdom:
- Register and pay taxes (when they’re applicable) to the HMRC
- Keep accounting records and business registers
- File annual accounts with the Companies House
- Submit annual tax returns to the HMRC
- Send annual confirmation statements to the Companies House
- Report changes in time to the Companies House
- Comply with other local regulations (licenses and permits for example) when starting certain business activities in the UK. Consult professionals if necessary.
Overall, to start a business in the UK, you need to take 3 steps. They’re picking the types of business, forming the company, and opening a corporate account.
You should choose between a limited company and an LLP. You can easily establish either one of them in just 1-3 working days, with our incorporation service. We can further assist you in opening either a traditional bank account or a multi-currency account with Wise.
BBCIncorp provides everything you need to start your business today in the United Kingdom. Our experienced consultants are always willing to answer any questions. Contact us now via firstname.lastname@example.org.
Frequently Asked Questions
1. Can a foreigner open a business in the UK?
Yes, foreigners of different nationalities (non-UK residents) can own a company in the UK. Directors of limited companies also do not need to be residents. Foreigners can open a business in the UK in 3 steps:
- Pick the business type (limited company or LLP)
- Register a company (you can do this easily with incorporation services)
- Apply for a corporate account
2. Is it easy to start a business in the UK?
It is not that hard to set up a business in this island nation. All members (directors included) of a company can be non-residents and the business registration can be online. The main difficulties are getting a local address in the UK and a corporate account after company registration.
If you are a foreigner, the advice is to use an incorporation service. It’ll help you cover every requirement and make sure the formation process stays on the right track.
3. How much does it cost to start a business in the UK?
Our incorporation packages are $499 for an LLP. They include a local address in the UK, a service address for the members, and a government fee. We’ll take on the registration process. You only need to supply us with certain documents.
You’ll also need to apply for a corporate account. We can further support you to open a multi-currency business account with Wise, without any additional charge. The Wise account can function just like a traditional bank account.
4. How do I start a limited company or a limited liability partnership in the UK?
Here are the steps you can take to quickly register your company or LLP in the UK:
- Choose the name (subject to several rules)
- Use a service for your UK company
- Make a payment for the service
- Supply the required information for the service provider
- Wait and receive the result
For detailed information about the steps, please read our guide above.
5. Can I open a UK bank account as a non-resident?
It is very difficult for a company with non-resident members to open a bank account with UK banks.
There’re 2 solutions for this matter. You can apply to banks in other countries or open a business account with Wise. BBCIncorp can support you in both solutions.
Disclaimer: While BBCIncorp strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact BBCIncorp’s customer services for advice on your specific cases.
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