Category: Incorporation >> Incorporation Around the World

Advantages and Disadvantages of Incorporations in UK


Incorporations are fast becoming an important business entity due to its numerous advantages such as protection of personal assets, limited liability, life long continuity and various kinds of tax breaks. Today an increasing number of businesses are not only incorporating themselves but are doing so overseas. This is because many countries in a bid to lure investors are offering a variety of tax write offs and other such incentives. The United Kingdom is on such country, which is offering various businesses and corporations the chance to pay little or no taxes on their business.


So why incorporate in the UK? The answer is obvious. The UK was and is amongst the top trading and financial powers in the world. With it a stable economy and providing easy access to European markets and the European Union, incorporating a business in the UK is also simple, easy and straightforward. An essentially capitalistic economy, the UK is one of the major driving forces of business in the entire world.

Incorporating a business in the UK is an excellent solution for foreign businessmen and entrepreneurs who not only wish to have the prestige of owning a business incorporated here, but who also receive the benefits of little or no taxation. A key feature of incorporating a business in the UK is that you get the organizational flexibility of a corporation as well as the tax status of a partnership with limited liability. This is possible due to the fact that in the UK an LLC is a legal entity separate from its members.


Some advantages of incorporations in the UK include:


  • The UK has excellent economic stability and a solid and well-developed infrastructure.
  • Since an LLC is a partnership and is a legal entity on itself, the members enjoy limited liability, i.e. their liability is limited to the amount of money they invest in the corporation.
  • Anyone can be a partner in a corporation, even a legal entity. There are no restrictions on the nationality of the partners, who can either be residents or non-residents of the UK.
  • There are no restrictions for the directors, secretary or shareholders to be foreign nationals or companies.
  • Owing a corporation is advantageous in the UK especially if you have a foreign partner. This is because the income passed through to the partners of a corporation is taxed at an individual level.
  • Having an LLC means that you can have a VAT number. VAT stands for value added tax and is an advantage for those who wish to trade in Europe as well.
  • Annual returns must be filed on a yearly basis and which formally name the directors, secretary and shareholders of the corporation.
  • An LLC must have only one or more directors and a secretary. However, if there is only one director then he or she cannot be the secretary as well.
  • If an LLC does not trade in the UK, no corporate taxes need be paid. However if a company does trade in the UK, it must file annual accounts and will pay a corporation tax.


There are not many disadvantages of trading the UK, however some disadvantages are as follows:


  • It is a requirement that annual returns must be field with the Companies House.
  • Once an LLC has been formed it must start trading within a year, or the Companies House will strike it off.
  • If a company trades while it is insolvent or bankrupt, the government can initiate a case of fraud against it.
  • Having a corporation means having a greater burden of paperwork to fulfill.
  • LLCs are required to keep their accounts open to public inspection.
  • A registered office is required to be maintained in the UK.
However all things considered the benefits of incorporating in the UK definitely outweigh its disadvantages.





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