Take Advantage of The added Credibility of A UK LLP And Trade Outside the UK Tax Free
A UK Limited Liability Partnership can be a useful tool for international entrepreneurs who want to trade tax free around the world. This is particularly true if you’re not a UK resident.
When you set up UK LLP, you have all the advantages of a limited liability company.
The assets of the partners can’t be touched by creditors of the UK LLP, like a limited company.
UK LLPs Are Taxed Differently from UK Limited Companies
Where it gets interesting is how UK LLPs are taxed. The LLP, as an independent legal entity, is not taxed.
The limited partners themselves are taxed, but only if they are UK residents or trading in the UK.
Therefore, residents of more tax friendly jurisdictions can set up a UK LLP, use it to trade and invest internationally, and have no tax liabilities.
For example, if you are running an international consulting business and have a tax residence in Panama, you could trade through a UK LLP and not be subject to UK taxes.
A UK LLP Has More Credibility for International Trading Than Standard Offshore Companies
Some entrepreneurs find it much easier to set up payment processing with a UK LLP than with companies incorporated in obvious tax havens.
It’s much easier to set up a merchant account with the UK-based entity than it is with a company from Belize or the BVI. It’s much easier to set up bank accounts and brokerage accounts with a UK entity than with a company incorporated in Panama or Nevis. There will be no difficult questions to answer from compliance departments as a UK entity is not an obvious vehicle used to trade tax free.
UK Residents Can Trade Tax Free Too – With a Few Tweaks
Even UK residents can take advantage of the tax benefits of a UK LLP.
A UK resident is taxed on his worldwide income. However, a UK LLP can have offshore entities as its limited partners.
Provided the UK LLP doesn’t make any profits in the UK, there will be no tax liability there as the limited partners (the offshore companies) are not UK residents.
You can set up a UK LLP easily and inexpensively. The annual running costs should be less than £1000 per year to maintain a UK address and take care of the regulatory filings. It’s a small price to pay to be able to trade tax free with a credible vehicle.
Bank accounts can be set up with the major UK banks, including HSBC, Lloyds and Barclays. Offshore accounts are also easy to set up in any jurisdiction worldwide. You could set up banking in a non CRS country where your accounts will not be reported to your home tax authority.
Use Nominees as Limited Partners for Privacy
If privacy is important, it’s possible to use nominees as limited partners. The nominees can be offshore companies or individuals who are residents in tax-friendly jurisdictions. This will allow you to trade tax free no matter where your country of residence is.
Merchant accounts can be set up directly with UK banks or with providers like Stripe and Worldpay. This is much easier than trying to set up this kind of facility with an offshore company.
The UK LLP setup works well for entrepreneurs and global nomads who are conducting day-to-day business rather than those who simply want to hold assets in an offshore structure.
I’d recommend that you use the UK LLP to produce invoices and collect payments. It’s a great vehicle to use for consultants and freelancers, provided you’re not a UK resident or doing most of your business in the United Kingdom.
After you receive the payments, they can be wired safely outside the UK to an offshore bank in a tax haven, assuming you’re banking in the UK.
If you need to hold substantial assets in the UK LLP, one of your offshore companies could hold security over those assets. Although, as I said, a UK LLP is a trading vehicle rather than an asset protection vehicle. You can find better asset protection options here.
The security can easily be put in place and filed with Companies House in the UK.
It’s easy to trade tax free with a UK Limited Liability Partnership. Provided the limited partners are not UK residents, and you’re doing the majority of your trading outside the UK, it’s an almost perfect solution. You can gain maximum credibility while paying minimum or zero taxes and low maintenance costs.
For international trade, consulting businesses, and global nomads, there are numerous strong use cases to trade tax free with a UK LLP.
See the UK guidance here about setting up a UK LLP, or let us take care of everything for you by clicking below to get in touch.
Liberty Mundo help clients from around the world set up offshore structures to minimize tax and protect assets. We help high net worth clients set up overseas residencies, offshore companies and trusts and get second passports and legal residencies. If you’d like our help to set up your offshore structure and cut your tax bill by 90% or more click here to get in touch.