The UK remains a popular destination for international entrepreneurs looking to establish a presence or expand their business, or invest capital in a reputable and business-friendly environment. In this guide, we will explain the essentials of forming a UK LLP for non-residents, including what HMRC requires and how to maintain compliance in the current tax year.
To this end, choosing the right business structure is imperative, considering the tax implications attached to it. Among the various business structures available, the Limited Liability Partnership (LLP) stands out for its flexibility, limited liability protection, and credibility.
Helpfully, for non-residents wanting to establish a business foothold in the UK, setting up a UK LLP is not a laborious process. For instance, non-residents can operate an LLP without needing to live or be physically present in the country.
Need Help or Have a Query? Get in touch with our professionals at AccountingFirms. Connect with the Best Accounting and Tax Experts near you in just 3 minutes – Register now for Free!
What is a UK LLP?
A Limited Liability Partnership (LLP) is a hybrid business structure that is a fusion or combination of a traditional partnership and a limited company, as it merges the elements of both. It offers:
- Limited liability protection to its members (partners), i.e., the liability of the members does not exceed the amount they invest in the business.
- Flexibility in internal management via an LLP agreement.
- Transparent taxation(it is a pass-through entity), where profits are passed directly to members and taxed individually.
Furthermore, while LLPs are commonly used by professional services firms, such as consultancies, accountancy practices, and legal services, they can be suitable for a range of international businesses.
Is it possible to set up a UK LLP for non-residents?
Yes, it is entirely and absolutely possible to set up a UK LLP for non-residents. HMRC places no bars or restrictions on the nationality or residence of the members of an LLP.
Accordingly, the LLP formation process is the same for both UK residents and non-residents, and non-residents can be members, including individuals and corporate entities.
The key requirements for a UK LLP formation are:
- At least two members are needed to form an LLP, though at least one member must be an individual.
- A minimum of two designated members are required (individuals or companies).
- A registered office address within the UK.
- A valid LLP agreement. Although it is not mandatory for Companies House, it is essential for legal clarity.
- Registration with Companies House.
- Registration with HMRC for tax purposes.
- The LLP must be a lawful, commercial entity established and operating for profit.
Understanding the process for setting up a UK LLP for non-residents:
The following steps elaborate on how to create a UK LLP for non-residents can establish and operate an LLP in the UK:
Choose a name for the LLP:
Undeniably, choosing a name for your LLP is the foremost step, for it will become your business identity. Now, while selecting a name, you must take a few things into account, such as:
- The name must be unique, i.e., it is not the same or similar to an existing registered entity.
- It must be free from sensitive or restricted (offensive)words.
- Note that the name has to feature ‘LLP’ at the end. For instance, it must end with “LLP” or “Limited Liability Partnership”.
You can check name availability on the Companies House website.
Appoint at least two members:
The LLP structure for non-UK residents does not require any partners to be UK residents or nationals. Subsequently, similar to the requirements for UK residents, non-residents are required to have at least two members (individual or corporate) to form an LLP.
However, at least one member must be an individual. Similarly, there must be at least two designated members who represent or act as an agent of the LLP, and are legally responsible for meeting the LLP’s compliance obligations, like filing annual returns and accounts.
Notably, these members can be non-UK residents (individuals) or non-UK companies (corporates). Furthermore, personal identification information of these members will be required during registration.
Learn more about LLP members:
How to add a new partner to an LLP?
Explaining how to remove a partner from LLP in the UK.
Obtain a UK-registered office address:
The next step in the process of how to form a UK LLP for non-residents involves securing a registered office address in the UK. To elaborate, all UK LLPs must have a physical address in the UK where official correspondence can be sent from HMRC and Companies House. This can be a commercial address, an accountant’s address, or a registered office service provider.
Register the LLP with Companies House:
Fortunately, the process of LLP’s incorporation is not complicated or time-consuming. Non-residents can easily register the LLP online via the Companies House website.
Alternatively, professional service providers, such as a proficient accountant, can register it on your behalf. It is noteworthy that registering an LLP includes filling out a Companies House LL IN01 form.
You can submit this form online or send it by post. It costs £71 to send a paper application to register (incorporate) an LLP. However, online registration is faster and more cost-effective. Moving on, the registration requires the following details:
- The LLP name.
- Details of all members.
- The registered address
- SIC code indicating the LLP’s business activity.
- Statement of compliance with formation rules.
- An agreement that outlines how it will run.
Register your LLP with HMRC for tax purposes:
Once registered with Companies House, the LLP must notify HMRC that it is trading. Ensuring tax compliance with HMRC is an essential step after setting up a UK LLP for non-residents. HMRC will assign a Unique Taxpayer Reference (UTR) for the LLP.
Essentially, in line with the HMRC’s guidelines,
“Generally, tax legislation treats an LLP as a partnership carried on by the individual members. However, a corporate member of the LLP would be subject to corporation tax on its share of the profits.”
Now, let’s dig the tax treatment of an LLP a little deeper!
In a Limited Liability Partnership (LLP), the tax treatment primarily depends on how profits are distributed among its members.
Primarily, LLPs are treated as tax-transparent entities, meaning that the income is not taxed at the entity level and thus LLPs do not pay Corporation Tax. Instead, LLPs offer pass-through taxation in which profits and losses are passed to the individual partners, who then pay income tax on their share of profits.
As a result, each member must register for self-assessment to report and pay their tax, even if they are non-residents. More importantly, while individual members will pay income tax, the corporate members of an LLP will pay corporation tax on their share of the profits.
Therefore, it is essential for members to understand their specific tax obligations based on their status as individuals or corporations.
In addition, it might be relevant to mention that non-resident partners are usually only taxed on income generated through UK sources. This signifies that non-UK income may not be subject to UK taxation.
You can learn more about the tax liabilities and profit allocation of LLP members by referring to our following guides:
What are the tax responsibilities of LLP members?
How do LLP members get paid in the UK? Learn the essentials.
Get in touch with our young, clever, and tech-driven professionals if you want to choose a solution to tax burden or accounting problems in the UK for your income. We will ensure to offer the best services.
Final word:
In conclusion, if you are looking for how to set up a UK LLP for non-residents is entirely possible and can be a shrewd move for entrepreneurs and international firms seeking a respected business presence in the UK.
Nonetheless, although the process for setting up a UK LLP for non-residents is relatively straightforward, maintaining compliance with Companies House and HMRC requires care and attention to detail, particularly around taxes and annual filings.
However, you can uncomplicate things for yourself by turning to a skilled and certified accountant who will diligently and thoroughly carry out all your LLP’s obligations in the UK while you reap the business benefits.
At Accountingfirms, we have registered accountants who have listed their services and their corresponding prices for you to choose from as per your business requirements.
With their expert knowledge of UK business laws, HMRC regulations, and LLP formation processes, they can help non-residents seamlessly establish their LLP, register with HMRC, manage annual accounts, and fulfil all ongoing compliance obligations efficiently.
Therefore, whether you are launching a consultancy or expanding your operations in the UK, relying on professional support ensures your LLP starts and steers in the right direction.
Disclaimer: The information provided on AccountingFirms.co.uk is for informational purposes only and should not be considered as financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.