Tax And National Insurance

Partners are self-employed and will be taxed on their share of any profits. Each pays fixed rate Class 2 National Insurance contributions and Class 4 contributions on their share of the profits.

Limited Liability Partnership

A limited liability partnership is similar to an ordinary partnership in many ways but a partner’s liability is limited to the amount of money they have invested in the business (plus any personal guarantees they have given on loans). Limited liability partnerships are a relatively new form of business structure, only being available over the last few years. As a result, they are not yet as common as ordinary partnership arrangements in the licensed trade.

Pros

• A partner’s liability for business debts is limited.
• It has many benefits of an ordinary partnership.

Cons

• Its formation is more complicated and expensive than an ordinary partnership.
• You must register with Companies House.
• There are additional rules and requirements.
• Accounts must be filed with Companies House.
• Your financial information is publicly available.

Separate Legal Entity

A limited liability partnership is regarded as a separate legal entity from its partners. This means that the limited liability partnership itself is responsible for any debts that it runs up, not the individual partners. This is because when a limited liability partnership enters into a contract, it binds itself and not its members.

Tax And National Insurance

Despite being a separate legal entity, a limited liability partnership is treated as a partnership for tax purposes. The limited liability partnership will not itself be chargeable for tax on its profits, instead each member will be taxed on their share of the profits and also be required to make National Insurance contributions as in the case of a partnership. The limited liability partnership and the individual members must make annual self-assessment returns to HM Revenue and Customs.

Limited Liability Company

A limited liability company exists in its own right and is owned by shareholders. Shareholders are not responsible for the company’s debts (except where personal guarantees have been issued by them), and their liability is limited to the amount of money they have invested in the business. Private limited companies have one or more shareholders, but shares cannot be offered to the public (eg on the stock exchange). Public limited companies must have at least two shareholdes and can offer shares to the public via the stock exchange. The number of licensees using this form of business structure has grown in recent years due to the tax benefits that some people have enjoyed. In order to ascertain whether there would be advantages for you and your business, you should seek professional advice from an accountant.

Pros

• Shareholder’s liability is limited.
• A limited company has credibility.
• There may be tax advantages.

Cons

• Its formation is complicated.
• There are setting-up costs.
• You must register the business with Companies House.
• You must submit annual accounts to them.
• Your financial information is publicly available.
• There are additional rules and regulations that you must follow.
• National Insurance contribution payments may be higher.

Running A Limited Liability Company

Limited liability companies must have at least one director and a company secretary. Anyone running a pub using a limited liabilty company will be regarded as employees of the business, and not self-employed. Licensees will normally appoint themselves as company directors and will also own the business through the shares that they own in it. Directors may be paid a salary and any business profits can be distributed to its shareholders in the form of a dividend payment.

Tax And National Insurance

Companies pay corporation tax based on the level of profit they earn. The company also has to pay employer’s Class 1 National Insurance contributions for all its employees. Directors will be taxed on their salaries and pay Class 1 National Insurance contributions (PAYE). In their capacities as shareholders they may also be taxed on their dividend earnings.