Jurisdiction(s):
United Kingdom

Key definition

Limited Liability definition

What does Limited Liability mean? In legal practice, limited liability means an owner’s personal exposure for a business’s debts is capped because the business has a separate legal personality. In a company limited by shares, a shareholder’s liability is limited to any unpaid amount on their shares. In a company limited by guarantee, a member’s liability is limited to the sum they agree to contribute on a winding up. These outcomes are set by statute (UK Companies Act 2006; Irish Companies Act 2014) and are broadly consistent across England and Wales, Scotland, Northern Ireland and Ireland. Related forms include UK limited liability partnerships...

US LLC incentive arrangements: UK tax treatment for UK-resident members, including profits and capital interests, unit plans, options and double taxation relief post-Anson

Published by a LexisNexis Share Incentives expert

Practice notes

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What is an LLC and how is it different to other forms of business organisation?

A limited liability company (LLC) is a legal form of business organisation in the US. It is essentially a hybrid structure, blending characteristics of a corporation and a partnership together. Comparable to a UK private limited company, it grants owners limited liability protection, whilst, subject to elections made by the entity, it may potentially be treated as fiscally transparent for tax, much like a partnership.

Where an LLC is regarded as, or elects to be, tax transparent, all profits and losses flow directly to its owners—who are members rather than shareholders—and tax is therefore charged on the members instead of the entity itself.

Nonetheless, despite the potentially advantageous tax position of LLCs, the treatment of LLC members for tax across different jurisdictions is not always simple in practice. By way of example, the taxation of UK LLC members and income arising to the LLC in the UK is considered below. Outcomes can depend on local law and any elections made by the particular entity. The discussion that follows addresses these issues.

Why are LLCs used as a form of business organisation?

LLCs are favoured as...

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Stephen Diosi

Mishcon de Reya

Stephen leads the Employee Incentives team at Mishcon de Reya. He has significant experience advising on the strategy, design, implementation and compliance of UK and global employee incentive arrangements, including long term incentive plans, all-employee share plans, HM Revenue and Customs tax-advantaged plans, management incentive plans and growth share and joint ownership plans. Stephen also advises on all related corporate, tax and trusts aspects, corporate governance issues, disclosure of directors' remuneration and share dealing regulations.In addition, Stephen works with companies on the impact that corporate actions have on their incentive arrangements and has acted on many public takeovers, mergers and acquisition, public to private transactions, initial public offerings, capital raising activities and private equity deals.Stephen also advises on contractual disputes and tax investigations relevant to incentives arrangements.Stephen works with a wide range of businesses across several industry sectors, including financial services, natural...

Web page updated on 22/05/2026

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