Limited Liability Partnership (LLP) Overview

CLA Group helps our multi-national Clients register Limited Liability Partnerships (LLPs) in every country on the planet. The information below will help you understand the benefits of this entity:

What is an LLP?

• An LLP is a hybrid of a Limited Liability Company (LLC) and a General Partnership (GP).
• Partners enjoy limited liability but are taxed as individuals.
• The LLP is legally tax-exempt from corporation tax; income tax is payable in the country of registration.
• Instead of shareholders, there are partners.
• Instead of directors, there are managers.
• Instead of a Memorandum & Articles of Association (M&AA), there is a partnership agreement.

Advantages of an LLP

• Some countries (e.g., UK, USA, Canada, Singapore) grant LLPs tax exemption on income, corporation tax, VAT, and GST.
• Faster to register than an LLC in most jurisdictions.
• Lower annual tax bill than an LLC, especially if directors' fees or dividends are involved.
• LLCs often face double taxation; LLP profits are taxed only once at partner level.
• Global LLPs can include corporate partners, ensuring confidentiality and additional limited liability.
• Profits distributed according to the partnership agreement rather than share capital proportions.
• Most jurisdictions do not require audited annual financial statements for LLPs.
• Lower paid-up share capital requirements compared to LLCs.
• Easy conversion to an LLC if required later.
• Income is taxed at partners' personal rates, not at the corporate level.

Disadvantages of an LLP

• LLCs in some countries (e.g., Singapore, Ireland) enjoy better tax exemption brackets.
• In certain jurisdictions, LLP tax bills can be higher than LLCs if directors' fees or dividends are not used.
• Raising private equity or venture capital is often easier with an LLC.

Detailed Comparison Table: LLC vs LLP vs Company Limited by Guarantee