A limited liability partnership is a legal structure designed for businesses that would usually operate as traditional partnerships. Typically, these types of businesses include accountancy firms, solicitors, dentists, veterinary practices, architects, chartered surveyors, medical practitioners, and other professional services firms.
Since the introduction of the limited liability partnership format in 2001, these firms can operate as LLPs and provide limited liability to their members (partners). This means that individual partners are not personally responsible for business debts and liabilities beyond what they invest or guarantee to the LLP.
In this sense, LLPs are similar to limited companies, but they retain the internal flexibility and tax benefits of a traditional partnership structure.
Difference between an LLP and a traditional partnership
Limited liability partnerships share certain similarities with traditional partnerships:
- A legal business structure that is set up by two or more people for the purpose of making a profit
- The internal management structure is very flexible
- Each partner is taxed as a self-employed individual, rather than the business being taxed as a whole and being paid a salary
However, they also differ in a number of ways, namely legal status, the limited liability of the partners and the professional image of the business:
- An LLP exists as an individual ‘person’ in the eyes of the law. It has a separate legal identity, so it can enter into contracts in its own name and is responsible for its own debts and liabilities.
- LLP members are only liable for what they invest or agree to contribute toward the LLP’s debts. Partners in a traditional partnership do not have limited liability, so they are responsible for all debts owed by the partnership.
- LLPs are usually held in higher regard because their incorporated status creates the image of a more credible and established business. LLPs are subject to stricter regulations and reporting requirements, and they have to disclose certain information on public record. This creates a level of corporate transparency and trust that is more appealing to other businesses and lenders.
Who owns a limited liability partnership?
A limited liability partnership is owned by members, or ‘partners’. There are no directors or shareholders. LLPs require a minimum of two members. There is no restriction to the maximum number of partners an LLP can have.
LLP members are self-employed for tax purposes. They must register for Self Assessment, pay Income Tax and National Insurance on their share of business profits and prepare their own tax returns for HMRC. The LLP itself is not taxed as a whole.
At least two LLP members are required to be ‘designated members’. In some LLPs, it is required that all partners be designated members. These partners are responsible for additional administrative duties and must ensure the LLP and the other members adhere to their statutory responsibilities. If fewer than two persons are appointed as designated members, the law views all members as designated.
Who can be an LLP member?
An LLP member can be an individual person or a corporate body (another LLP, a company, firm, organisation, etc). Their details are displayed on public record. Any person who wishes to set up an LLP or become a member of an existing LLP must be at least 16 years old.
If you are an undischarged bankrupt or you have been placed on the Disqualified Directors Register, you are not permitted to become an LLP member until your situation changes or you are granted permission by the Court.
Responsibilities of LLP designated members
All members of an limited liability partnership have the same rights and duties, but designated members are assigned additional legal responsibilities, in much the same way as a director or secretary assumes such responsibilities in a limited company. These extra duties include:
- Preparing and signing annual accounts and annual Confirmation Statements on behalf of the LLP and its members
- Filing accounts and Confirmation Statements at Companies House by the statutory deadlines
- Informing Companies House about changes to the business – e.g., members’ details, registered office address, registered name of the business, SIC codes, etc
- Acting on behalf of the LLP if it is dissolved
- Appointing an auditor
Does an LLP require a registered office address?
Limited liability partnerships must provide a registered office for Companies House during the incorporation process and maintain it for the entirety of its existence. The registered office serves as the official contact address of a partnership where statutory mail and legal notices are delivered. Registered office details are displayed on public record.
A registered office must be a full postal address in the country in which the LLP is incorporated, i.e. England and Wales, Scotland or Northern Ireland. It is possible to change the registered office address at any time, as long as it remains in the same country and Companies House is notified within 14 days.
Do LLP members need a service address?
LLP members must provide service address details for Companies House. This will serve as their official contact address where they will receive statutory mail and notices. The details are placed on public record. LLP members may use a residential or a non-residential address located anywhere in the world. Many people simply state their LLP’s registered office as their service address.
How to register a limited liability partnership
The simplest way to register a limited liability partnership is online through a company formation agent. Rapid Formations provides a tailor-made formation package for LLPs, with registration approved in just 3-6 business hours. To complete an online application, you will have to provide the following information:
- LLP name
- Registered office address
- Members’ details, including a service address
- Designated members’ details
- Statement of compliance – members’ consent to form, and become part of, the LLP
- Partnership agreement – optional but recommended
Applications are submitted to Companies House electronically. Digital copies of your incorporation documents will be emailed to you as soon as your application is approved.
Where to display details of your LLP
The Companies Act 2006 requires limited liability partnerships to disclose certain details to the general public at its registered office address and other places of business, on official stationery and all websites.
These trading disclosure regulations are included in ‘The Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015 (SI 2015/17)‘, and they are in place to ensure the legal identity of every LLP is revealed to anyone who has, or may wish to have, dealings with the LLP.
Displaying your LLP’s name
With the exception of LLPs that have been dormant since the date of their incorporation, every limited liability partnership must display its full registered name on a sign at the following locations:
- Registered office address
- Any other inspection location (i.e., a Single Alternative Inspection Location (SAIL) address)
- Any location where it carries on business activities, unless such an address is primarily used as a private residence or the LLP’s activities are likely to attract violent objections
- Clearly visible to visitors at all times
- Characters that can be read with the naked eye
- Continuously displayed, unless the location is shared by 6 or more LLPs. In which case, the sign must display the registered name of each LLP for at least 15 continuous seconds at least once every 3 minutes, or make the registered name of each LLP available for inspection on a register
An LLP must also include its full registered name on all forms of business stationery, documents and communications, whether in hard copy or electronic form. This includes:
- Letters, notices and official publications
- Emails and faxes
- Bills of exchange, promissory notes, endorsements and order forms
- Cheques signed by or on behalf of the LLP
- Orders for money, goods or services signed by or on behalf of the LLP
- Bills of parcel, invoices and other forms of payment requests, receipts, and letters of credit
- All other forms of business correspondence and documents
- Websites – the LLP name does not have to be displayed on every web page, but it must be clearly visible and legible to viewers
- Insolvent LLPs – those in liquidation, administration or receivership – are not required to display their registered name at any premises that are also the place of business of the insolvency specialists.
- An LLP does not have to display its registered name at any business location if the residential addresses of every LLP member cannot be disclosed by Companies House to a credit reference agency; however, this exception does not extend to the registered office address or inspection place for an LLP’s statutory records and registers.
Disclosure of additional business details
All forms of business correspondence, order forms and websites must contain the following LLP details:
- The part of the UK in which the LLP is registered, i.e. England and Wales, Scotland, or Northern Ireland
- LLP registration number – you will find this on your certificate of incorporation
- Registered office
- Limited liability status – if your registered LLP name ends with ‘LLP’ or the Welsh equivalent, you must disclose the fact that your company has limited liability status
If an LLP is being wound up, is in administration or receivership, or has a moratorium in force in respect of its debts, it must be stated on all invoices, order forms and business letters that it is being wound up.
Disclosing information upon written request
LLPs must provide the following information to anyone with whom it trades with, if a written request is made:
- Registered office.
- Inspection location address (this may be the registered office or SAIL address).
- Type of LLP records kept at the registered office or SAIL address.
If any such written requests are made, the LLP must comply and provide the information in writing within 5 working days of the request being made.
Disclosing LLP members’ details
An LLP may choose to disclose the names of its members on its website and any form of business correspondence. In such instances, the names of all LLP members must be disclosed. You cannot simply include the name of one or a few members, other than in the body of a letter or for the purpose of signing a document.
This rule does not apply if an LLP has more 20 members, providing the LLP states on the document that a full list of members’ names can be viewed at its principal place of business.