Guide to Limited Liability Partnerships

What is a Limited Liability Partnership?

In 6 April 2001, Companies House introduced a new corporate identity known as the Limited Liability Partnership (LLP). This is a new business vehicle that gives the benefits of limited liability whilst retaining other characteristics of a traditional business partnership.

An LLP will be taxed in the same way that existing Partnerships are taxed at present, and the internal structure will be similar. Unlike a limited company, an LLP has no Memorandum & Articles of Association, but can be governed by a partnership agreement tailored to suit. It is expected that LLPs will prove most attractive to professional firms such as Accountants and Solicitors. We believe also that there will be relief from stamp duty on property transferred into an LLP from an existing partnership within the first year of incorporation.

The LLP, as with a Limited Company, will be a separate legal entity, and whilst the LLP itself will be responsible for its assets and liabilities, the liability of its members will be limited. As with companies, however, actions may be taken against individual members who are found to be negligent or fraudulent in their dealings.

Any firm consisting of two or more members engaged in a profit-making venture may become an LLP. The new vehicle is not suitable for non-profit making enterprises. Many of the rules that relate to Limited Companies also apply to LLPs. These include the registrations of names and many of the requirements for filing of information at Companies House, such as annual accounts and annual returns. In general, many aspects of the Companies Act apply to LLPs, and the legislation that has been created to deal with LLPs in fact draws significantly upon the Companies Act in various aspects.

Suitability of a Limited Liability Partnership

Unfortunately, this is not a matter for us to consider. We recommend that you research this option very carefully. LLPs are a new concept, and it is advisable to seek comprehensive professional advice from your accountant or tax adviser before making any commitment.

We shall, however, be happy to discuss your situation with you and recommend suitable advisers as necessary. Please contact us on 0800 092 0789 or search our associate web site at www.accountancy.org to find a local accountant to meet your requirements.

Choosing a Name

The choice of a name for an LLP follows the same rules as with limited companies. Companies House will maintain the register in conjunction with the present list of company names. An LLP cannot have the same name as an existing company. Please see our section on Choosing a Company Name, and use our standard company name check facility to determine whether your chosen LLP name is available.

Structure of an LLP

An LLP has members and designated members. With the agreement of the other members, a member may become a designated member. Designated members have the same rights and duties as any other member, but there are additional responsibilities such as signing accounts on behalf of the LLP, delivering accounts and annual returns to the Registrar, notifying the Registrar of changes to the LLP's members or registered office and acting on behalf of the LLP in the event of winding up.

An LLP must have at least two "designated members" at any time, otherwise the members' limited liability may be at risk. There is no specific requirement to have any non-designated members and there is no maximum to the number of members allowed.

In general terms, an LLP is governed by the Partnership Agreement that may already be in force within an existing partnership, in conjunction with the general law. There is no requirement to file any governing document at Companies House. We can provide assistance in drafting a suitable Partnership Agreement if required.

The LLP must also have an official registered office, just as with a limited company, which is recorded at Companies House. Unlike limited companies, there are no directors or company secretary, and of course, no shareholders.

Stationery

As with limited companies, there is certain information that must be displayed on the LLP's stationery. All business letters, notices and publications, cheques, bills, invoices etc must bear the full name of the LLP including the words Limited Liability Partnership or the abbreviation LLP.

In addition, all business letters and order forms must show the following:

• The place of registration - eg; "Registered in England & Wales" or “Registered in Scotland”
• The registered number
• The fact that it is a Limited Liability Partnership
• The address of its registered office