Ordinary and designated LLP members – what’s the difference?

LLP members are partners who jointly own and run a limited liability partnership (LLP). There are two types of members: ordinary and designated. You need two or more members to register an LLP at Companies House. At least two of those members must be ‘designated’ to perform extra duties on behalf of the partnership. 

In this post, we explain the rights and duties of LLP members, including the difference between ordinary and designated members. We also discuss the procedures for assigning or changing designated member status and the importance of clarifying members’ rights in a formal LLP agreement. 

What is an ordinary LLP member?

An LLP member is any person (individual or corporate) who enters into an agreement with other members to form a limited liability partnership or become a member of an existing LLP after incorporation. 

An ordinary LLP member is any member who isn’t a designated LLP member. As agents of the partnership, they must show a duty of care in relation to the transactions they enter into on behalf of the LLP. This extends to:

• Carrying out the LLP’s instructions
• Exercising appropriate care and skill
• Behaving honestly and declining inducements or personal profits in respect of the LLP’s business
• Not allowing any conflicts of interest

Members jointly own and run a limited liability partnership, sharing in the LLP’s capital and profits or losses. They are also liable to contribute to the partnership’s assets upon its winding up or insolvency. 

What is an LLP designated member?

An LLP designated member is simply an LLP member who is responsible for performing additional duties in relation to a partnership’s management and legal administration.

Their role is to ensure that the LLP and all of its members comply with the statutory requirements of the Limited Liability Partnership Act 2000, the Limited Liability Partnership Regulations 2001, and any other legislation and regulations that may be relevant to the business.

Acting on behalf of the partnership and other members, designated members have responsibilities similar to those of company directors and secretaries. As such, they are legally accountable if they fail to fulfil their statutory obligations.

Duties of LLP designated members

In addition to the duties applying to ordinary LLP members (as outlined earlier), designated LLP members are responsible for extra duties in relation to the partnership. These include:

• Maintaining statutory LLP registers, including the LLP register of members and the LLP Register of People with Significant Control (PSC register)
• Maintaining the LLP’s registered office address, signage, and official stationery  
• Appointing an accountant and auditor
• Preparing, signing, and filing annual accounts with Companies House
• Preparing and filing an annual confirmation statement
• Submitting an annual Partnership Tax Return with HMRC 
• Notifying Companies House of any changes to the LLP’s registered details, including details of members
• Acting on behalf of the partnership upon its winding up or dissolution

Designated members are legally accountable if they fail to carry out their statutory responsibilities.

Additional management duties 

Under a partnership agreement, additional management powers may be granted to designated members – similar to those of company directors. These may include:

• Overseeing daily operations 
• Dealing with suppliers and key stakeholders 
• Ensuring all members adhere to the terms of the partnership agreement
• Registering the partnership for Self Assessment
• Registering for VAT and PAYE (where applicable)
• Maintaining accounting records, financial documentation, and other LLP paperwork 
• Submitting VAT returns and paying VAT bills
• Ensuring all PAYE tasks are completed
• Signing contracts and other documents on behalf of the LLP
• Ensuring the business complies with data protection rules
• Arranging and maintaining relevant insurance policies (e.g. Employers’ Liability, Public Liability, Professional Indemnity)

However, it is common in many LLPs for all members to participate in managing the business, usually based on their expertise and contributions. Members will decide between themselves which duties each person will perform, outlining them in the partnership agreement.

Who can be an LLP designated member?

On the agreement of other members, any individual can be an ordinary member or a designated member of an LLP unless they are:

• Under the age of 16
• Disqualified from acting as an LLP member or a company director
• An undischarged bankrupt

In some cases, the court may grant special dispensation to allow disqualified persons or undischarged bankrupts to act as LLP members or take part in the management of an LLP.

Corporate bodies, such as limited companies and other LLPs, can also be appointed as ordinary members or designated members of an LLP. In such instances, they are known as ‘corporate members’.

How to appoint an LLP designated member

By law, every limited liability partnership must formally appoint at least two designated members. If an LLP has only two members at any time, both members will be designated.

Similarly, if an LLP fails to identify at least two designated members (or the number falls below two at any point), Companies House will automatically consider all members to be designated.

Limited liability partnerships can appoint designated members during and after incorporation. They can also change the status of any member from designated to ordinary, or vice versa, at any time.

Appointing a designated member during incorporation

To assign designated status to particular members during the LLP incorporation process, you must indicate each relevant member’s consent on the LLP incorporation form (Companies House form LL IN01). 

You do this by checking the box in the member appointment section that states, ‘Please tick this box if the person is consenting to act as a designated member.’

Self Assessment requirements for limited liability partnerships (LLPs) Running an LLP: filing and reporting requirements  Distributing profits in a limited liability partnership (LLP)

However, if all members are to be appointed as designated members, you must select ‘Yes’ when asked, ‘Will all members from time to time be designated members?’ 

If you form an LLP online with Quality Company Formations, you will select designated members by checking the relevant boxes on our simple online incorporation form. You will have the option to select particular members or all members as designated. 

Appointing a designated member after incorporation

To assign designated status when appointing a new LLP member, you must indicate on form LL AP01 (or LL AP02 for a corporate member) that the person is being appointed as a designated member.

The form must be filed with Companies House online or by post within 14 days of the new member’s appointment.

Changing the designated status of an existing LLP member

When an existing LLP member’s status changes from ordinary to designated or vice versa, you must file form LL CH01 (or form LL CH02 for a corporate member) with Companies House within 14 days of the change. 

Simply check the relevant box on the online or paper form to indicate whether the person consents to act as either a ‘designated member’ or ‘member’ of the LLP.

Alternatively, if an existing LLP wishes to change its designated status from all members to only specified members, or vice versa, you should complete Companies House form LL DE01 instead. Where applicable, you will need to send form LL CH01 or LL CH02 at the same time to identify the specific members who consent to act as designated members.

Defining members’ rights and responsibilities in an LLP agreement

The default rights, duties, and responsibilities of LLP members are set out in the LLP Act 2000 and the LLP Regulations 2001. However, it is advisable to prepare a written LLP agreement before setting up a limited liability partnership.

This important document, which becomes legally binding once agreed upon and signed by all members, clarifies how the partnership must operate. It usually specifies the following:

• Mutual rights and duties of all members
• Rights, duties, and responsibilities of designated members
• Defined roles and specified rights of individual members (to clarify their specific duties, areas of expertise, and seniority)
• Each member’s investment contribution
• Distribution of profits (or losses) and capital
• Decision-making rules and procedures
• Membership requirements
• Procedures for the appointment, resignation, and retirement of members
• Dispute resolution procedures 
• What should happen in the event of any member’s incapacitation or death

Whilst optional, it’s good practice to put a carefully drafted partnership agreement in place, especially when there are variations between the rights and duties of different members. You can create your own LLP agreement, but it is often best to consult a solicitor for specialist help and tailored advice.

It’s important to understand that an LLP agreement extends beyond any document labelled ‘LLP Agreement’. It also includes any written, verbal, or implied agreements that govern the relationship between members of the LLP and the relationship between the LLP and its members.

Default partnership agreement rules 

In the absence of any written or verbal partnership agreement, the default provisions under Regulations 7 and 8 of the Limited Liability Partnership Regulations 2001 will govern how an LLP operates. 

Under these rules, all members will be treated equally, which may not be appropriate for the partnership or reflect the contributions of individual members.

The default provisions include the following:

• All LLP members are entitled to share equally in the profits and capital of the limited liability partnership
• Every member may participate in the management of the partnership
• No person may become a member without the consent of all existing members
• A majority of members may make decisions on ordinary matters, but the consent of all members is required to make changes in the nature of the business
• A majority of members cannot expel a member unless the power to do so has been granted by express agreement between all members.

In practice, these provisions rarely apply since they are usually overridden by what is set out in a formal LLP agreement. However, they may be suitable for some small LLPs in which all members are equal. 

Register a limited liability partnership online

Combining the tax transparency and flexibility of a general partnership with limited liability protection for members, an LLP is one of the most popular business structures for industry professionals who traditionally operate as partnerships – for example, solicitors, accountants, and other professional services firms.

At Quality Company Formations, our Limited Liability Partnership Package is available for just £69.99 plus VAT, providing online incorporation in 3 to 6 working hours. You’ll also receive digital and printed LLP incorporation documents and a free draft LLP Agreement, ensuring you have everything you need to set up an LLP today.

Thanks for reading 

We hope you’ve found this post helpful. If you have any questions, please comment below. You can also contact our London-based team if you need help setting up an LLP.

Explore the Quality Company Formations Blog for more LLP and limited company guidance.