Limited Liability Partnerships
A hybrid between the existing partnership and the limited company
Summary
The LLP is a business structure that became available in 2001 when the Limited
Liability Partnerships Act 2000 came into effect. The Limited Liability Partnerships
Regulations 2001 (SI 2001 No. 1090) supplement the provisions of the Act.
A Limited Liability Partnership (LLP) is a separate legal entity conferring
full limited liability on its members. It is created by registration at Companies
House. There must be at least two members, but there is no upper limit. At least
two of the members must be named as 'designated members', who accept responsibility
for sending information to Companies House for registration, etc.
An LLP is subject to the same rules as a private limited company for the registration
of accounts at Companies House, and the auditing of its accounts. The same exemptions
from these requirements are available.
The Act does not impose a structure for the management of an LLP. There are
no statutory provisions for general meetings, directors, company secretary,
share allotments, etc. As with an ordinary partnership, these are matters for
the members to decide for themselves and to include in an LLP agreement. There
is no statutory requirement to register (or even to have) a written partnership
agreement, but such an agreement is essential in practice. Implied terms, which
apply in the absence of agreement to the contrary, are set out in the Limited
Liability Partnerships Regulations 2001 (see below).
The LLP is treated for tax purposes as an ordinary partnership: i.e. each partner
is liable to income tax for his or her share of the profits, and to Capital
Gains Tax in respect of any gains made on the disposal of assets belonging to
the LLP.
An LLP makes an ideal format for a professional partnership or a small business
where there are at least two partners. It is simple to operate and very flexible.
We strongly advise, however, that an LLP should only be set up on advise from
an accountant because of the potential tax consequences.
An LLP cannot be set up electronically and registration time is about one week
from when the forms are submitted to Companies House. We can offer an expert
service for the formation of an LLP, and can e-mail the forms to you for completion.
As part of our standard service, we supply our own standard LLP agreement, but
we also provide an expert drafting service for such agreements to be tailor-made.
Standard LLP formation costs are £150 plus £22.75 VAT (including
£20 registration fee).
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