The benefits of forming a limited liability partnership<\/span><\/a>\n \nAn LLP member can be a human individual or a corporate entity, like a limited company. However, there must always be at least one human member. An LLP cannot be owned by corporate members alone.<\/p>\n
If a member leaves an LLP and this results in there being just one member for more than 6 months, the business will lose its limited liability status. The sole remaining member will be personally liable for any debts incurred during this time. Additionally, Companies House may initiate proceedings to strike off the entity.<\/p>\n
LLP members and \u2018designated\u2019 members<\/h3>\n Anyone can set up a limited liability partnership or become a member of an existing LLP, as long as they are not:<\/p>\n
\nan undischarged bankrupt<\/a><\/li>\nsubject to UK government restrictions<\/li>\n a disqualified company director<\/a><\/li>\nrestrained by any other court order<\/li>\n under the age of 16<\/li>\n<\/ul>\nIt is also possible for corporate entities, such as limited companies or other LLPs, to be members of an LLP, as long as there is at least one human member in the LLP already.<\/p>\n
Each member must register for Self Assessment. They work as self-employed individuals through the LLP, so they are responsible for reporting their income to HMRC and paying their own taxes.<\/p>\n Ordinary and designated LLP members – what’s the difference?<\/span><\/a>\n \nIt is possible, however, for some partners to be expressly employees, whereby they receive a fixed salary through PAYE rather than taking a share of profits as a self-employed member.<\/p>\n
LLP members normally share the responsibilities of running the partnership. They also share the profits, which are normally distributed according to their level of investment or the work they carry out.<\/p>\n
The rights, responsibilities, and duties of all members should be clearly outlined in a partnership agreement.<\/p>\n
Designated LLP members<\/h4>\n LLPs should have two \u2018designated members\u2019 at all times. They have all of the same rights, responsibilities and duties as ordinary members, but they have additional legal responsibilities (such as appointing an auditor) to ensure that the LLP and its members comply with their statutory obligations.<\/p>\n
If you do not appoint two designated members, all members of the LLP are deemed by law as designated.<\/p>\n
Limited Liability Partnership default regulations<\/h3>\n If the members do not make other agreements in a formal Limited Liability Partnership Agreement, the LLP and its members are governed by the default provisions stated in the Limited Liability Partnership Regulations 2001<\/a> (Part. VI Default Provision, Regulations 7 and 8).<\/p>\nRegulation 7<\/h4>\n The mutual rights and duties of the members and the mutual rights and duties of the limited liability partnership and the members shall be determined, subject to the provisions of the general law and to the terms of any limited liability partnership agreement, by the following rules:<\/p>\n
\nAll the members of a limited liability partnership are entitled to share equally in the capital and profits of the limited liability partnership.<\/li>\n The limited liability partnership must indemnify each member in respect of payments made and personal liabilities incurred by him\u2014 \n(a) in the ordinary and proper conduct of the business of the limited liability partnership; or \n(b) in or about anything necessarily done for the preservation of the business or property of the limited liability partnership.<\/li>\n Every member may take part in the management of the limited liability partnership.<\/li>\n No member shall be entitled to remuneration for acting in the business or management of the limited liability partnership.<\/li>\n No person may be introduced as a member or voluntarily assign an interest in a limited liability partnership without the consent of all existing members.<\/li>\n Any difference arising as to ordinary matters connected with the business of the limited liability partnership may be decided by a majority of the members, but no change may be made in the nature of the business of the limited liability partnership without the consent of all the members.<\/li>\n The books and records of the limited liability partnership are to be made available for inspection at the registered office of the limited liability partnership or at such other place as the members think fit and every member of the limited liability partnership may when he thinks fit have access to and inspect and copy any of them.<\/li>\n Each member shall render true accounts and full information of all things affecting the limited liability partnership to any member or his legal representatives.<\/li>\n If a member, without the consent of the limited liability partnership, carries on any business of the same nature as and competing with the limited liability partnership, he must account for and pay over to the limited liability partnership all profits made by him in that business.<\/li>\n Every member must account to the limited liability partnership for any benefit derived by him without the consent of the limited liability partnership from any transaction concerning the limited liability partnership, or from any use by him of the property of the limited liability partnership, name or business connection.<\/li>\n<\/ol>\nRegulation 8: Expulsion<\/h4>\n No majority of the members can expel any member unless a power to do so has been conferred by express agreement between the members.<\/p>\n
Paying tax in an LLP<\/h3>\n LLPs are transparent for tax purposes. They do not pay Corporation Tax like limited companies do, but they must register for VAT if annual turnover exceeds \u00a390,000 (2024\/25 threshold).<\/p>\n
In terms of profit distribution and taxation, LLP members are treated the same way as partners in general partnerships. Profits are shared amongst members, sometimes equally, while other times each member will keep the profit for the actual work they personally carry out.<\/p>\n Never miss another confirmation statement deadline<\/span><\/a>\n \nMembers are then individually required to report their income to HMRC through Self Assessment at the end of every tax year and pay Income Tax and Class 4 National Insurance on these profits. They must also pay Capital Gains Tax on any share of gains made by the LLP.<\/p>\n
If an LLP has employees, it must be registered as an employer. The LLP will deduct and pay Income Tax and National Insurance from its employees’ wages through PAYE. It will also have to pay employers’ National Insurance contributions to HMRC.<\/p>\n
LLP reporting requirements<\/h3>\n Designated members must fulfil the following legal obligations on behalf of the LLP:<\/p>\n
\nRegistering the LLP for Self Assessment with HMRC (each member must also register separately as an individual)<\/li>\n Registering the LLP for VAT if turnover exceeds \u00a390,000\/year<\/li>\n Maintaining accounting records and statutory LLP registers<\/li>\n Preparing and signing accounts on behalf of all members and submitting them to Companies House and HMRC<\/li>\n Appointing an auditor where necessary<\/li>\n Filing an annual confirmation statement (this used to be called an annual return) at Companies House<\/li>\n Notifying Companies House if there are any changes to:\n\nMember appointments<\/li>\n Designated members<\/li>\n Existing members\u2019 details<\/li>\n Information about People with Significant Control (PSCs)<\/li>\n Registered office address<\/a><\/li>\nLocation of statutory registers<\/li>\n Name of the LLP<\/li>\n Nature of business activities carried out by the LLP<\/li>\n The LLP’s registered email address<\/li>\n<\/ul>\n<\/li>\n Appointing an auditor if required<\/li>\n Acting on behalf of the LLP if it is wound up and dissolved<\/li>\n<\/ul>\nLimited liability partnership agreement<\/h3>\n While a limited liability partnership agreement, or \u2018Deed of Partnership\u2019, is not a legal requirement, it is highly advisable to have one. It is an important private document that provides a legal framework for members\u2019 conduct and the way the LLP should be run.<\/p>\n
The terms of an LLP Agreement are decided by the members themselves. You can alter the terms at any time, as long as all members agree to the changes.<\/p>\n
A typical LLP Agreement will cover the following key areas:<\/p>\n
\nLLP name and registered office address<\/li>\n Business activities carried out by the LLP<\/li>\n Details of each member<\/li>\n Details of designated members and their respective duties<\/li>\n Information about People with Significant Control<\/a><\/li>\nCapital contribution and liability of each member<\/li>\n How profits or losses will be divided between members<\/li>\n Whether any members are salaried employees<\/li>\n Rights, responsibilities and duties of each member<\/li>\n Decision-making rules and procedures<\/li>\n Dispute resolution policy<\/li>\n Procedures for appointing new members<\/li>\n Provisions in the event of a member leaving, dying, or becoming incapacitated<\/li>\n Holiday entitlement and arrangements<\/li>\n Winding up procedures<\/li>\n<\/ul>\n Running an LLP: filing and reporting requirements\u00a0<\/span><\/a>\n \nAn LLP Agreement is an effective way to avoid misunderstandings and disputes between members. It is a legally binding document, but there is no need to file a copy at Companies House. It should be kept at the registered office address, and a copy should be provided to each member.<\/p>\n
Registering a limited liability partnership<\/h3>\n You register a limited liability partnership in exactly the same way as you would register a limited company. The easiest way to set up an LLP is to purchase our limited liability partnership package<\/a> at a cost of \u00a369.99.<\/p>\nIt will take you approximately 5 to 10 minutes to complete the order process and your new LLP should be registered by Companies House within 24 hours.<\/p>\n
To register an LLP, you will need:<\/p>\n
\nLLP name<\/li>\n Preferred name ending (\u2018LLP\u2019 or \u2018Limited Liability Partnership\u2019, or the Welsh equivalent if your registered office is situated in Wales)<\/li>\n Registered office address<\/li>\n Minimum of two members. The following details should be provided:\n\nTitle, full forename(s) and surname<\/li>\n Former name(s)<\/li>\n Date of birth<\/li>\n Country\/State of residence<\/li>\n Nationality<\/li>\n Residential address<\/li>\n Service address<\/li>\n Whether or not the member is designated<\/li>\n<\/ul>\n<\/li>\n Details of all People with Significant Control (PSCs)\n\nTitle, full forename(s) and surname<\/li>\n Date of birth<\/li>\n Country\/State of residence<\/li>\n Nationality<\/li>\n Residential address<\/li>\n Service address<\/li>\n Nature of PSC\u2019s control in the LLP<\/li>\n<\/ul>\n<\/li>\n<\/ul>\nOnce your application form is complete, you will submit it electronically to Companies House and await approval, which is normally given in under 24 hours. When the incorporation is approved, you will receive a certificate of incorporation showing the registered details of your new LLP.<\/p>\n
Before you start trading, you should draw up an LLP Agreement to avoid any potential issues further down the line. Best to start as you mean to go on and give yourself and your business the best change of success.<\/p>\n"},"excerpt":{"rendered":"
A limited liability partnership is one of the available legal structures that you can use to set up and run a business in the UK. Often referred to as an \u2018LLP,\u2019 a limited liability partnership is simply a business partnership that is owned by two or more members (partners) who have limited liability for the…<\/p>\n","protected":false},"author":10,"featured_media":6509,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false},"categories":[1236],"tags":[],"class_list":["post-5280","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-limited-liability-partnership","category-1236","description-off"],"acf":[],"yoast_head":"\n
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