What is a Limited Liability Partnership?

Limited Liability Partnerships are an alternative corporate business vehicle that gives the benefits of limited liability but allows its members the flexibility of organising their internal structure as a traditional partnership.

Plummer Parsons offers a formation service that will help you start up a limited liability partnership in the UK.

There is no requirement for a Memorandum or Articles of Association. It is recommended (though not compulsory) that a Limited Liability Partnership agreement be drawn up between the partners.

Who can form a limited liability partnership?

The Limited Liability Partnership Act 2000 generally allows two or more persons associated for the purpose of carrying on a lawful business with a view to profit to form a limited liability partnership.  There is no requirement for a partner to be a UK resident.

Who will be liable for the Limited Liability Partnership?

The Limited Liability Partnership will be a separate legal entity and while the Limited Liability Partnership itself will be liable for the full extent of its assets the liability of the members (partners) will be limited. 

As with any other company, it can in some circumstances be possible to make a partner of an Limited Liability Partnership liable on his or her own account, e.g. for negligent mis-statement. This can occur where the partner has been negligent when carrying out work for a client. Such liability is rare depending as it does on the member of the Limited Liability Partnership assuming personal responsibility for advice given, and that assumption being relied on by the client.

What is the difference between a UK limited liability partnership and a UK limited liability company?

The main difference between a Limited Liability Partnership or LLP and a limited liability company is that a Limited Liability Partnership has the organisational flexibility of a partnership and is taxed as a partnership. In other respects it is very similar to a company.

What is the difference between a member and a designated member?

With the agreement of the other members, a member may become a designated member at any time.  Designated members have the same rights and duties towards the Limited Liability Partnership as any other member.  These mutual rights and duties are governed by the Limited Liability Partnership agreement (which we recommend you have drawn up) and the general law.  However, the law also places extra responsibilities on designated members. In particular, designated members are responsible for:

  • appointing an auditor (if one is needed)
  • signing the accounts on behalf of the members
  • delivering the accounts to the Registrar
  • notifying the Registrar of any membership changes or change to the registered office address or name of the limited liability partnership
  • preparing, signing and delivering to the registrar an annual return (Form LLP363a)and acting on behalf of the limited liability partnership if it is wound up and dissolved.
  • Designated members are also accountable in law for failing to carry out these legal responsibilities

What is the minimum number of designated members a limited liability partnership requires?

Every limited liability partnership must have at least two, formally appointed, designated members at all times. If there are fewer than two designated members then every member is deemed to be a designated member. The limited liability partnership may itself decide that all members will be designated members or that only some members will be designated members.

Does a Limited Liability Partnership have a constitution in the form of Memoradum and Articles of Association like a company?

No, The Limited Liability Partnerships Act 2000 does not impose a structure for the management of an Limited Liability Partnership. There is no statutory provision for general meetings, directors, company secretary, share allotments, etc. As with the existing common law partnership, these are matters for the partnership agreement which we recommend you have drawn up.

How will a Limited Liability Partnership be taxed?

The Limited Liability Partnership in the UK is to be treated for tax purposes as an ordinary partnership: i.e. the partners will be liable to income tax under Schedule D for their share of the profits, and to Capital Gains Tax in respect of any gains made on the disposal of partnership assets. 

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