What you should know...
A limited liability partnership (LLP) is an alternative type of business structure which is popular with professionals who normally operate as a general partnership, such as solicitors, doctors, architects. but whose members require limited liability. The key differences between an LLP and a limited company are:
- An LLP does not have directors, shareholders or guarantors; instead it has members, who are more commonly referred to as 'partners'. There must be at least 2 members to register an LLP, but there is no upper limit to the number of members permitted.
- LLPs are governed by the Limited Liability Partnership Act 2000 and The Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009, rather than the Companies Act 2006.
- LLPs are taxed as partnerships, meaning they are not liable for Corporation Tax but each member is personally responsible for paying Income Tax and National Insurance on their individual profit.
Benefits of a limited liability partnership
- LLP profits are shared between its members.
- The method of taxation for LLPs allows for an increased level of tax transparency, in addition to allowing members to remain separate for tax purposes.
- You can appoint another company (termed as a ‘corporate body’) to be a member of an LLP. Any corporate members will be liable for Corporation Tax rather than Income Tax.
- LLP members can be based anywhere in the world - there is no requirement for members to be UK residents.
Forming a limited liability partnership
1st Formations offers a dedicated LLP Package for incorporating limited liability partnerships. Below are the key points about LLPs:
- They must be registered with Companies House, the official Registrar of Companies in the UK.
- They must have a minimum of 2 members, and at least 2 of the members must be ‘designated’ members who are responsible for ensuring all legal obligations of the company and its members are met.
- They must have a registered office address for incorporation. This should be a full postal address (not a PO Box Number) in the same UK jurisdiction (country) the LLP is registered in.
- LLPs must supply information about their People with Significant Control (PSCs). Generally, the members will be the PSCs.
- Designated members must ensure that HM Revenue & Customs (HMRC) is informed of the LLP's existence and that a Partnership Tax Return is filed each year.
- LLPs must be formed with the view to making a profit. This business structure is not suitable for non-profit organisations.
