Limited Liability Partnerships or LLPs were introduced by the Limited Liability Partnership Act 2000. The LLP Act made provisions for these business vehicles to exist, and also set out the rules governing them.
What is a Limited Liability Partnership?
An LLP has features of both a general partnership under the Partnership Act 1890 and a Limited Company. It offers members a limited degree of liability like a Limited Company, but members are taxed as individuals as they would be in a general partnership.
An LLP is incorporated, meaning that unlike partnerships it has a separate legal personality and is able to contract on its own behalf. An LLP can also own partnership property, enter into contracts and employ staff, like an individual or a company. If you want to discuss the transfer of your business to an LLP or a limited company then our partnership law solicitors can advise you.
Limited Liability Partnership
The key issue is that the LLP has limited liability. The members of the LLP have their liability limited to the value of their share of the capital of the LLP, in the same way that shareholders in a limited company have their liability limited by their share capital. Partners in general partnerships have unlimited joint (and several) liability.
However from a tax viewpoint, the members of an LLP are treated as self employed (Schedule D) rather than employed (Schedule E) which can be advantageous.
Members (Not Partners)
Those entering a limited liability partnership are members rather than partners.
LLPs must also have Designated Members who are responsible for ensuring that all the relevant regulatory paperwork is correctly filed at Companies House.
It is possible for LLPs to have salaried members and fixed share members.
Advice on entering a Limited Liability Partnership
Members will need an LLP partnership agreement between them to regulate their interaction and especially to agree exit provisions and shares of profits. This could prove invaluable if the LLP runs into difficulties or disputes.
If you are in need of advice concerning entering a Limited Liability Partnership, or disputes arising within one, contact one of Ralli’s expert partnership law solicitors now on 0161 832 6131, or complete the contact form.