Businesses change and grow over time.
This is a good thing. But there are times when you need to look at the structure of your company and assess whether it’s still the best option for your new business.
Although there are similarities between the two business types, there are also differences between a Limited Liability Partnership (LLP) and a UK Limited Company (LTD). And there are some compelling reasons and benefits to converting from an LLP to an LTD.
If you’ve set up your business as an LLP, and no longer want to share the ownership, or want reduced tax rates and greater liability protection as your profits have grown, you might want to consider converting your LLP to an LTD instead.
But what do you need to do when converting an LLP to a UK limited company? The whole process is easier than you might think with these simple steps.
Do your research first: your new responsibilities as a Limited Company
Before we tell you how to convert from an LLP to a Limited Company, it’s worth highlighting the differences in responsibility you will need to be ready for.
The biggest, and most important, change between an LLP and an LTD is your tax returns.
Instead of submitting individual tax returns and paying tax on your share of the company, you will now have to be paid a salary through PAYE systems, while the company itself becomes liable for corporation tax and employers’ national insurance contribution taxation.
Generally speaking, this will mean better tax breaks for you, especially if you pay yourself a lower wage and extract company profits through dividends.
As well as filing your annual reports and ensuring that you pay your tax on time, you will also be responsible for:
- The health and safety of your company, including conducting regular risk assessments, ensuring industry regulation compliance and providing a safe working environment for employees and visitors.
- Comply with all employment law regulations, such as employment contracts, minimum wage laws, and working time regulations. You’ll also need to implement fair dismissal and disciplinary procedures, provide necessary training and support for employees and ensure compliance with anti-discrimination and equality laws as well as set up workplace pension schemes.
- Notify Companies House of changes in directors, shareholders, or company address, and maintain statutory records as well as your annual returns and accounts.
Okay, responsibilities out of the way, let’s discuss how to go from an LLP to an LTD.
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Converting an LLP to a UK limited company – The DIY approach
Although there’s no simple form you can fill out, the good news here is that the process isn’t as complicated as you might think.
In a nutshell, you need to create a limited company and transfer your current assets over. In order, this means you need to:
1. Register a limited company at Companies House
You will need to follow this process as if you’re creating a brand-new company, which in effect, you are. This means that you will need to:
- Choose a company name, which could be the same as your LLP name. However, to do this you must submit written confirmation that your LLP has no objection to your new name and will be dissolved. This is because Companies House cannot have two companies with the same name on the register.
- Appoint your directors and allocate shares. If you’ve come from an even partnership, this might be a straightforward split of 50/50 shares with both parties named as a director.
- Create the memorandum of association, which binds all members of the company in to following the correct procedures as set out in the Companies Act.
- Complete the application form, which will allow you to submit all of the above information as well as the details of all directors and shareholders of the company.
To DIY this process yourself will cost £50 online, or you can use company formation agents to complete this process on your behalf and remove all of the headaches involved. If you’re unsure about any part of this process, download our free formation guide here.
2. Transfer assets and liabilities from the LLP to the newly formed business
There are different approaches that you can take to transfer assets from one company to another. You can:
- Use a plain asset transfer. This is the most straightforward approach, but if you have any creditors, this process can become a little complicated as it could be perceived as an attempt to obstruct their claims.
- Sell your assets to the new company. However, because the assets are sold they will be liable to capital gains tax.
- Create a holding structure. This is where a parent subsidiary is used to transfer the assets, which can protect you from certain capital gains tax or protect from any liabilities.
Whatever structure you decide to use, we’d recommend doing this under a contract and seeking legal advice to make sure it’s done in the best possible way.
3. Resign from the LLP, and enter new contracts with the LTD
All members of the LLP have to officially resign from their position at that company, then sign new contracts with the newly formed limited company.
4. Dissolve the LLP
Once the assets are gone and trading has stopped, you can dissolve the LLP. This involves notifying all relevant parties, including any members, creditors and the HMRC.
You also need to complete and submit a form to remove you from the Companie’s House register, which will most likely be the LL DS01 for voluntary strike-off. You will also need to pay a fee of £44 to Companies House to complete this application.
Once the dissolution is complete, you will get a confirmation statement from Companies House. And that’s it – your LLP is no more and your LTD is trading and ready for your future.
Have a formation agency take care of it all
Company formation agents will be able to handle this entire process on your behalf, so you’re not stressing about the right types of forms to fill out or worrying about the minor details.
They’ll also provide you with extras like an official address if you need one, helping to protect your personal privacy if you don’t have a physical office location or if you work from home.
The best company formation agents to choose from
Ready to let someone take care of converting an LLP to a UK limited company on your behalf? We’ve tested and reviewed the best company formation agents around so you can go straight to the best.
Top-Rated Company Formation Agents
| Formation Agent | Cheapest Package | Add On Services | Our Rating | Review | Official Site |
|---|---|---|---|---|---|
 | £52.99 | Excellent | 9.4 | Read Review | Visit Website |
 | £51.99 | Excellent | 9.4 | Read Review | Visit Website |
 | £50 | Average | 9.4 | Read Review | Visit Website |
1. 1st Formations
You’re in safe hands with 1st Formations. Rated as one of the leading online company formation agents in the UK, 1st Formations offer quick and easy packages depending on the type of organisation that you want to set up.
Their fees are transparent, with lots of additional extras to include every service that you need.
The only downside? It can feel a little like information overload at times as they explain the entire process. If you don’t care about the details, it’s best to gloss over this part.
Our Business4Beginners rating: 9.4/10.
2. Quality Company Formations
Over the past 10 years, Quality Company Formations have helped over 250,000 set up their businesses in the UK. Boasting 99% positive reviews, this formation agency has some of the best customer support on offer when it comes to setting up your LTD.
In addition, Quality Company Formations also offer a free check of all client applications to ensure accuracy and some of the lowest prices on the market, making it the best value for money.
Our Business4Beginners rating: 9.4/10.
3. Rapid Formations
Rapid Formations promise a quick and easy formation service. And with companies formed within three to six hours, they deliver on their rapid name.
Rapid Formations are a great option if you want a simple and quick formation, and offer an online customer portal to talk to their team for any extra support. They offer a number of basic packages and advanced services for that outside of the UK – and LLP packages to suit.
Our Business4Beginners rating: 9.3/10.
Need any more business help?
Here you have it, our easy guide to converting an LLP to a UK Limited Company. If you’re after more help, at Business4Beginners, we’ve got the latest news, tips, and advice that you need to grow your business.
