# Limited company vs LLP: what's the difference?

Pick My Accountant (https://pickmyaccountant.co.uk/answers/limited-company-vs-llp/): Limited company vs LLP: what's the difference? — Quick answer. A limited company and a limited liability partnership (LLP) both limit their owners' liability for business debts, but they are taxed differently. A limited company pays corporation tax on its profits, at 19% to 25% from 1 April 2026, and one person can run it. An LLP needs at least two members. An LLP is usually transparent for tax, so each member pays Income Tax or corporation tax on their own share of the profits.

## Limited company vs LLP: side by side

| | Limited company | LLP |
| --- | --- | --- |
| Legal status and liability | Separate legal entity; owners liable only up to their investment | Separate legal entity; members not personally liable for debts it cannot pay |
| Minimum owners | One director, who can also be the only shareholder | Two members, with at least two designated members at all times |
| Registering | Companies House: £100 online, £124 on paper | Companies House: £100 using software, £124 on paper |
| Tax on profits | Corporation tax: 19% up to £50,000, 25% over £250,000, marginal relief between | Usually transparent: each member is taxed on their share of profits |
| Paying the owners | Salary through payroll, dividends from profits, or a director's loan | Profit shares, divided as the LLP agreement sets out |
| National Insurance | Employee and employer Class 1 on salaries; none on dividends | Individual members pay self-employed Class 4, like partners |
| Yearly filing | Accounts, confirmation statement (£50 online) and a Company Tax Return | Accounts, confirmation statement (£50 online), partnership return and members' own returns |
| What's public | Accounts and directors' details on the public register; home address kept private | Accounts and members' details on the public register; home address kept private |
| Who it suits | Single owners, or owners who want to keep profits in the business | Two or more owners wanting partnership-style tax with limited liability |

## Key facts

- An LLP needs at least two members to be set up and at least two designated members at all times.
- Corporation tax from 1 April 2026: 19% on company profits up to £50,000 and 25% above £250,000, with marginal relief between.
- Most LLPs are transparent for tax: each member pays Income Tax or corporation tax on their share of the profits.
- Registering either structure at Companies House costs £100 electronically or £124 on paper; the confirmation statement is £50 online.
- If an LLP trades with only one member for more than 6 months, that member can become liable for its later debts.

## What is the main difference between a limited company and an LLP?

The main difference is how profits are taxed. A limited company pays corporation tax on its own profits. An LLP is usually transparent for tax, so each member pays tax on their share of the profits instead. Both are separate legal entities that limit their owners' liability for business debts.

A limited company is owned by shareholders and run by directors. One person can be the only director and the only shareholder. An LLP is run by its members, and it needs at least two. Members should make an LLP agreement when they set up. It covers how profits are shared, who needs to agree decisions, members' responsibilities and how people join or leave. Both structures are registered at Companies House, and registration costs the same for each. Company owners are liable for its debts only up to their investment, and LLP members are not personally liable for debts the LLP cannot pay. Both also come with legal duties. Company directors can be fined, prosecuted or disqualified for failing to meet theirs. Designated members of an LLP can be prosecuted, and the LLP can be taken off the register.

## How are a limited company and an LLP taxed?

A limited company pays corporation tax on its profits from 1 April 2026: 19% up to £50,000 and 25% above £250,000, with marginal relief between. An LLP that runs a business with a view to profit is normally taxed like a partnership. Each member pays Income Tax or corporation tax on their share.

In a company, owners pay personal tax on what they take out. A salary goes through payroll, with Income Tax and National Insurance deducted. Dividends are paid from profits and are not earnings for National Insurance, though they can carry Income Tax. In an LLP, every member must register for Self Assessment. Individual members pay Income Tax and self-employed National Insurance on their profit share, like partners in an ordinary partnership. The LLP also sends a partnership tax return. A member can be a company, and a company member pays corporation tax on its share. Some members are taxed as employees under HMRC's salaried member rules. That can happen where a member's pay is mostly fixed rather than tied to the firm's overall profits. Our salary vs dividends page explains how company owners pay themselves.

## Who should choose an LLP rather than a limited company?

An LLP tends to suit two or more people who want to run a business together, share profits as they agree and keep partnership-style tax, while limiting their personal liability. A limited company tends to suit a single owner, or owners who want to keep profits in the business and pay themselves through salary and dividends.

An LLP cannot be a one-person business. The law needs two or more people to form one, and it must have at least two designated members at all times. If an LLP carries on business with only one member for more than 6 months, a member who knows this becomes liable, jointly with the LLP, for debts it takes on after that point. A company can be run by one person. An LLP must also be set up to carry on a business with a view to profit. So it is not a structure for charities or non-profit groups. The tax choice matters too. A company pays corporation tax on profits it keeps. LLP members are taxed on their share of the profits through their own tax returns.

## How do running costs and paperwork compare?

Both structures file annual accounts and a confirmation statement with Companies House, and both sets of accounts go on the public record. A limited company also files a Company Tax Return with HMRC. An LLP sends a partnership tax return, and every member registers for Self Assessment and files their own return.

Registration costs £100 electronically or £124 on paper for either structure. The confirmation statement is £50 online for both. Company directors and individual LLP members must verify their identity with Companies House. The difference is in the tax returns. A company's accountant prepares the accounts and the Company Tax Return, and runs payroll if directors take a salary. An LLP's accountant prepares the accounts and the partnership return, and may also prepare each member's personal return. On our benchmarks, accountancy for a limited company costs £83–£227 a month and for a partnership £79–£199 a month. We do not publish a separate LLP benchmark. An LLP has Companies House accounts as well as partnership tax work, so ask for quotes based on your number of members.

## Who this is not for

This page does not cover sole traders, ordinary or limited partnerships, charities or community interest companies. If you work alone, see sole trader vs limited company; an LLP must be run with a view to profit, so non-profit groups should look at other structures.

## FAQs

**Q: Can an LLP have one member?**
A: No. An LLP needs at least two members to be set up and at least two designated members at all times. If it carries on business with only one member for more than 6 months, a member who knows this becomes personally liable, jointly with the LLP, for debts taken on after that point.

**Q: Do LLP members pay corporation tax?**
A: Individual members do not. They pay Income Tax and National Insurance on their share of the profits through Self Assessment. A company that is a member of an LLP pays corporation tax on its share.

**Q: Is an LLP the same as an ordinary partnership?**
A: No. In an ordinary partnership the partners personally share responsibility for the business's debts. An LLP is a separate legal entity, and its members are not personally liable for debts it cannot pay, although both are taxed in a similar way.

**Q: Are LLP members self-employed or employees?**
A: Members are normally treated like partners and pay self-employed National Insurance. HMRC's salaried member rules can tax a member as an employee if all three of the rules' conditions apply, broadly where pay is mostly fixed, the member has no significant influence over the LLP and their capital contribution is low.

**Q: Can a company be a member of an LLP?**
A: Yes. A member can be a person or a company, known as a corporate member. A corporate member pays corporation tax on its share of the LLP's profits.

**Q: Does an LLP have to publish its accounts?**
A: Yes. The designated members must send annual accounts to Companies House, and the information in them appears on the public record, as it does for a limited company.

## Sources

- [GOV.UK: Set up and run a limited liability partnership (LLP)](https://www.gov.uk/guidance/set-up-and-run-a-limited-liability-partnership-llp) (checked 2026-10-21)
- [legislation.gov.uk: Limited Liability Partnerships Act 2000, section 4A](https://www.legislation.gov.uk/ukpga/2000/12/section/4A) (checked 2026-10-21)
- [HMRC Partnership Manual: PM131450 LLP taxation](https://www.gov.uk/hmrc-internal-manuals/partnership-manual/pm131450) (checked 2026-10-21)
- [GOV.UK: Set up a limited company](https://www.gov.uk/limited-company-formation) (checked 2026-10-21)
- [HMRC: Rates and allowances: Corporation Tax](https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax/rates-and-allowances-corporation-tax) (checked 2026-10-21)
- [Companies House: Companies House fees](https://www.gov.uk/government/publications/companies-house-fees/companies-house-fees) (checked 2026-10-21)
- [Pick My Accountant fee methodology (editorial benchmarks)](https://pickmyaccountant.co.uk/methodology/) (checked 2026-10-21)

Updated: 2026-10-21

Source: https://pickmyaccountant.co.uk/answers/limited-company-vs-llp/