Limited Liability Partnership as an international trading vehicle?

By Sonal Shah, Lawrence Grant

The need to consider effective structures to meet business requirements in an ever changing economic environment means we are constantly faced with creating opportunities for international traders wishing to use a UK entity in a potentially UK tax free environment. As such, we note an ever increasing use of a UK Limited Liability Partnership, or LLP.

The UK LLP is a form of separate legal business entity that is registered with the UK Registrar of Companies (also known as “Companies House”). It operates in a similar way to a UK limited company. However the significant differences from a UK limited company are as follows:

  • An LLP has members, not shareholders or directors. It must have at least 2 members who would also be the designated members with statutory responsibility for certain tasks.
  • An LLP is see-through for tax purposes in that the members are directly taxed on any trading income derived from the LLP.
  • A well drafted and thought through partnership agreement should be in place.

The UK LLP has the following similar characteristics to those of a UK limited company:

  • Electronic formation can take as little as 24 hours
  • Formation costs are very minimal
  • No minimum capital requirement
  • No UK nationality or UK residence requirements for the members; members can be non resident
  • Disclosure and filing requirements are similar to those of UK limited companies

So what makes the UK LLP attractive to international traders? Broadly speaking, the LLP pays no tax on its trading profits. Instead the members of the LLP are taxed on their share of the profits according to the tax laws of their country of residence. The members will not be subject to the UK tax if:

  • All trade takes place outside of the UK
  • All members of the LLP are non-resident – no restriction on the jurisdiction in which the members reside. Can be anywhere
  • The UK LLP is not controlled and managed in the UK
  • The UK LLP does not have a UK off ice or agency
  • The UK LLP does not own any UK property

Furthermore, members of the LLP can be individuals, corporate and/or nominee members. It is also possible to have a combination of corporate and non corporate members. This offers several interesting tax planning opportunities. The UK LLP therefore offers significant tax planning opportunities without falling foul of BEPS (Base Erosion and Profit Shifting) issues.

Sonal Shah
Lawrence Grant, Chartered Accountants, London, United Kingdom
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published: July 2015

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