A Limited Liability Partnership is a legal business entity where the members have limited liability for business debts and obligations. Unlike a general partnership, LLPs are separate legal entities distinct from their members.
Governed by the Limited Liability Partnership Act 2000, an LLP can be formed by two or more members, whether they are individuals or existing businesses. When asked “what is limited liability partnership?”, it is similar to a hybrid between a limited company and a general partnership that enables people (in a general sense) to limit their liability to their share of their investment, while being taxed as self-employed individuals.
An LLP is regarded as a person at law distinct from its members. Therefore, as it has an individual legal personality and is able to:
- Enter into contracts
- Employ staff
- Sue or be sued
- Buy, sell and lease property
Every LLP needs at least two designated members who are responsible for managing the legal and statutory requirements, including signing accounts, delivering accounts and notifying of membership changes to the Companies House. They are also liable should there be a non-payment of fines or penalties.
Limited liability partnership agreement
When looking to convert to an LLP, Ralli recommends that you gain an understanding of what is a limited liability partnership agreement and draw up a comprehensive deed for your business. While an LLP reduces the risk to members’ personal wealth and enables internal flexibility, this separate agreement will allow you to have further control over the LLP and its members as you can set up terms for the division of profits, management structure, capital contributions and dispute resolutions.
If you have any more questions related to “what is limited liability partnership?” or need advice on Limited Partnership law and general partnerships, contact Ralli on 0161 832 6131 to speak with one of our specialist solicitors.