For UK professionals — solicitors, accountants, architects, surveyors, consultants, and medical practitioners — the choice between a limited company and a Limited Liability Partnership (LLP) is one of the most consequential business decisions they will make. It determines how they are taxed, how they extract profits, how much personal liability they carry, and how the business is perceived by clients and regulators.
Both structures offer limited liability (unlike a traditional partnership). Both can have multiple owners. But their tax treatment is fundamentally different, and the gap in take-home pay can run to five figures per partner per year. This guide compares the two with real 2026 numbers. This is general information, not tax advice — consult your accountant.
What is a limited company?
A limited company is a separate legal entity. It owns the business, enters into contracts, employs staff, and pays tax in its own right. The owners are shareholders and typically also directors.
Key features:
- The company pays corporation tax on its profits: 19% on profits up to £50,000, 25% on profits above £250,000, with a marginal rate between those thresholds.
- Shareholder-directors extract money via a combination of salary (deductible for the company, taxable as employment income) and dividends (paid from post-tax profits, taxed at 8.75% basic rate, 33.75% higher rate, 39.35% additional rate).
- Profits can be retained in the company, deferring personal tax.
- The company's accounts are publicly visible on Companies House.
What is an LLP?
A Limited Liability Partnership is a hybrid: it offers the limited liability of a company but is taxed like a traditional partnership. The LLP itself pays no tax — profits are allocated to the members (partners), who pay income tax and National Insurance on their share at their personal marginal rates.
Key features:
- The LLP is tax-transparent: all profits are taxed in the hands of the members in the year they arise, regardless of whether the money is withdrawn.
- Members pay income tax (20%/40%/45%) and Class 2/4 National Insurance on their profit share.
- There is no corporation tax layer, no dividend tax, and no requirement for payroll (unless members are "salaried" under HMRC rules).
- Profit-sharing ratios can be adjusted year to year via the members' agreement — far more flexible than a company's fixed shareholding.
- LLPs must publish accounts at Companies House, including members' profit shares, making individual earnings publicly visible — a consideration for privacy-conscious professionals.
Tax comparison: a real 2026 example
Take a two-partner professional practice generating £200,000 of profit (£100,000 per partner). Here is how the tax compares:
Ltd Company route:
- Company profit: £200,000
- Salaries (2 × £12,570): £25,140 (corporation tax deductible)
- Taxable profit: £174,860
- Corporation tax (25% on £124,860 above £50k, 19% on £50k): ~£40,715
- Post-tax profit available for dividends: ~£134,145
- Dividends per shareholder: ~£67,073
- Dividend tax per person (on £67,073, after £500 allowance): ~£11,400
- Net per person (salary + dividend after tax): ~£68,240
- Combined take-home: ~£136,480
LLP route:
- LLP profit: £200,000 (allocated £100,000 each)
- Income tax per member (on £100,000): ~£27,430
- Class 4 NIC per member: ~£3,880
- Class 2 NIC per member: ~£179
- Net per person: ~£68,510
- Combined take-home: ~£137,020
At this profit level, the numbers are remarkably close — the Ltd Company saves roughly £270 per partner. But the picture changes at different profit levels:
| Profit per partner | Ltd Company net | LLP net | Difference |
|---|---|---|---|
| £60,000 | ~£46,300 | ~£45,200 | +£1,100 (Ltd wins) |
| £100,000 | ~£68,240 | ~£68,510 | -£270 (LLP wins) |
| £150,000 | ~£96,500 | ~£97,800 | -£1,300 (LLP wins) |
| £250,000 | ~£152,000 | ~£155,500 | -£3,500 (LLP wins) |
At higher profit levels, the LLP's tax transparency becomes an advantage — there is no double layer of corporation tax and dividend tax. At moderate profit levels (£60,000–£80,000), the Ltd Company's ability to control extraction timing and use the basic-rate dividend band gives it an edge.
Head-to-head comparison
| Factor | Limited Company | LLP |
|---|---|---|
| Tax structure | Corporation tax + income tax on extraction | Tax-transparent — partners taxed directly |
| Tax on £100k profit per owner | ~£31,760 total tax | ~£31,490 total tax |
| Profit retention | Yes — can defer personal tax | No — taxed as arising |
| NI treatment | Class 1 on salary (via payroll) | Class 2 + Class 4 on profit share |
| Public disclosure | Company accounts (less personal) | Members' profit shares publicly visible |
| Profit allocation flexibility | Fixed by shareholding | Can vary year to year |
| Sale/exit | Sell shares — straightforward | Sell business/assets — more complex |
| Regulatory preference | General business | Often required/preferred for solicitors, accountants |
| Administration | Payroll, dividend vouchers, CT returns | Partnership tax return, members' personal returns |
Who each suits
Limited company suits:
- Professionals who want to retain profits in the business — to build a war chest, fund expansion, or smooth income across years.
- Those who value privacy. Company accounts show director remuneration in bands, not exact figures; LLP accounts publish each member's profit share precisely.
- Businesses planning an eventual sale. Selling shares in a company is a well-established process with potential tax advantages (Business Asset Disposal Relief, reducing CGT to 10% on the first £1 million of gains).
- Practices where profits are moderate (£50,000–£80,000 per owner) and the dividend tax advantage is most pronounced.
LLP suits:
- Regulated professionals where the LLP is the industry standard — many law firms and accountancy practices are structured as LLPs, and some professional bodies prefer or require it.
- Partnerships with variable profit shares. If partners contribute different amounts of work or capital each year, the LLP's flexible allocation is far simpler than adjusting shareholdings.
- High-profit practices (£150,000+ per partner) where the absence of a corporation tax layer becomes an advantage.
- Those who want to avoid payroll administration. An LLP with genuine self-employed members does not run a payroll; a company with shareholder-directors does.
Practical considerations beyond tax
Tax is not the only factor. Several non-tax considerations weigh heavily:
Professional regulation. The Solicitors Regulation Authority (SRA) has traditionally required law firms to be structured as partnerships or LLPs, though the rules have relaxed in recent years. Accountancy practices face similar norms. Check with your professional body before incorporating.
Bank lending. Banks are generally more comfortable lending to limited companies — the structure is familiar, and they can take a floating charge over company assets. LLP lending is possible but often requires personal guarantees from members.
Pension contributions. A limited company can make employer pension contributions that are fully deductible against corporation tax — up to £60,000 per year per director — which is a powerful tax-planning tool. LLP members can also make personal pension contributions with tax relief, but there is no "employer" to make additional contributions on their behalf.
The bottom line
For most UK professional practices in 2026, the Ltd Company offers a slightly better tax outcome at moderate profit levels, superior privacy, easier exit planning, and more flexibility to retain profits. The LLP wins on flexibility of profit allocation, is often the regulatory default, and can be more tax-efficient at very high profit levels (£150,000+ per partner).
The right choice depends on your profession, your profit level, your growth plans, and your partners. The numbers above provide a starting point, but every practice is different — run the calculation with your own figures and a qualified accountant before committing to a structure that is expensive to change later.