Scottish limited partnership creation vs Scottish limited company start-up: when creating a limited partnership or setting-up a limited company in Scotland there are a few differences between the two entities. These are discussed below to help you decide which business formation is right for you.
A Scottish limited partnership (LP) is made up to two or more people, there must be at least one general partner and one limited partner. The general partner is fully liable for the business's obligations and debts, whereas the limited partner is only liable to the value of their investment in the partnership.
This is similar to being a shareholder in a limited company but carries more personal liability for the company's actions. Limited partners can invest cash or property into the partnership.
Unlike in other countries, such as England, limited partnerships in Scotland can be created as a separate legal entity, thus limiting the partner's liability. However, should the business trade outside of Scotland then the country they do trade in may apply their own law to any liability situations and the partners could find themselves personally accountable.
A Scottish limited company is owned by shareholders and run by directors, the directors can own shares in the company but they don't have to. As a limited company shareholders and directors are not liable for the company's obligations and debts, unless their own conduct whilst running the company is called into question. Limited companies are seen as a separate legal entity from their owners, thus limiting their overall liability.
A limited company is taxed as a separate entity every year and corporation tax must be paid. A Scottish limited partnership, however, is taxed in the same way as a standard partnership. Partners are taxed on their individual share and there are no separate taxes applied to the business even if it has been registered as a separate entity.
Scottish limited companies have to, by law, submit annual accounts to Companies House. Scottish limited partnerships do not. Both do, however, have to submit any relevant paperwork to HMRC.