Why Limited Liability Partnerships in Colchester?

Limited Liability Partnerships in Colchester and throughout the UK are one of the choices it is possible for people wanting to enter into business to use along with operating as a sole trader, setting up a partnership or looking to incorporate your business with a Limited Company? With this in mind, this blog post seeks to compare and contrast working as sole traders (or sole proprietorships) and limited liability partnerships with a view to then recognising why Limited Liability Partnershipss should be favoured.

Working as a sole trader effectively means that the specific business in question is owned and run by an individual. Therefore, this effectively means that there is no legal distinction between the business and the owner when the business is considered in relation to matters of liability amongst other issues. That this should prove to be the case in practice is despite the fact that they may actually have many people working for them as the business grows and becomes more profitable.

There are a number of positive aspects involved with working as a Sole Trader. For one thing, the owner receives all of the profits accrued from the business and also owns all of the business’ assets. In addition, trading as a sole trader is also considered to be somewhat advantageous because of the ability of this kind of business owner to generate capital either publicly or privately. Moreover, they also be able to limit the risk involved with a business for any potential investors along with having far fewer laws to adhere to in this regard.

There are also a number of disadvantages to this form of business ownership when compared with the other forms of business ownership that are under consideration here. This is because those that are looking to operate their businesses as sole traders have been recognised as having unlimited responsibility for all of the business’ debts and losses.

only have a finite period for carrying out their business since the business operation can effectively come to an end if the owner become ill or even dies. In addition, those running their businesses as sole traders are subject to the recognition of unlimited liability personally where the owner’s personal assets can even be taken away to cover losses/debts.

This understanding of the application of liability for sole traders is clearly somewhat different to the position in this regard for Limited Liability Partnerships that are a form of partnership whereby some or even all partners in a given business within the remit of a Limited Liability Partnership have limited liability unlike with unlimited partnerships.

As a result, this understanding of matters means, although Limited Liability Partnerships share many of the same facets as more standard forms of partnerships along with sole traders (where liability is unlimited) and limited companies where the ‘veil of incorporation’ acts to limit liability, there are also distinct differences. To this effect, it has been recognised that, whilst Limited Liability Partnerships are dealt with specifically under the Limited Liability Partnership Act 2000, all other forms of partnerships are dealt with under the Partnership Act 1890 except where a Partnership Agreement is specifically implemented for regulating their business affairs.

The difference between Limited Liability Partnerships and unlimited partnerships is emphasised by the fact that, unlike in an unlimited partnership, one partner in a given partnership is not considered responsible or liable for any of the other partners negligence or misconduct in relation to their ongoing activities. However, there is also a distinct similarity between Limited Liability Partnerships and limited companies in relation to the matter of liability because of the fact that some partners have a form of limited liability similar to that of company shareholders. As a result, this effectively means that the partners in this case of a business arrangement are not considered to be personally liable for any debts and/or losses that their business accrues during their operations. This is because, in much the same way as with a limited company, Limited Liability Partnerships membership cannot, except where there is wrongful trading or fraud, lose any more money than they actually invested in the partnership in the first place. Nevertheless, Limited Liability Partnerships are also understood as being ‘tax transparent’ in view of the fact that in the UK they have been found to pay no tax solely as a form of business. This is because any tax that is accrued by the business is actually for its membership to look to pay separately with regard to the income of gains that they are able to obtain through the operation of their business.

Contact Andrew Douglas Wills and Legal Services today via www.andrewdouglaswills.co.uk to see how we could help you to plan what form your business should take including Limited Liability Partnerships in Colchester and throughout the rest of Essex.

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