A limited liability partnership (LLP) is similar to a normal partnership, but it also offers reduced personal responsibility for business debts.
Unlike sole traders and partners of ordinary partnerships, the LLP itself – not the individual members – is responsible for any debts that it runs up, unless individual members have personally guaranteed a loan to the business.
LLPs are more complicated to set up and run than ordinary partnerships, as they have to meet many of the same requirements as limited companies. LLPs are designed to be used by profit-making businesses. Non-profit making organisations should not use this business structure.
This guide will give you a brief overview of what is required.
If you are unsure about any aspect of forming an LLP, seek professional advice from your solicitor, accountant or formation agent.
Table of Contents
The members of an LLP
Any group of two or more people who want to set up a profit-making business together can form a limited liability partnership (LLP), unless one of them has a disqualification order (disqualified to act as a company director or LLP member) in place. It is also possible for companies, and other LLPs, to be members of an LLP.
How many members should an LLP have?
An LLP must have at least two members, and at least two must be ‘designated’ members. If there are fewer than two designated members then every member is deemed to be a designated member.
The rights and responsibilities of LLP members
The members of an LLP normally share in both the responsibilities of running the business and the profits that it makes. Exactly how their rights and responsibilities are defined and divided depends on the LLP’s partnership agreement or ‘deed of partnership’. Designated members have some extra responsibilities on top of those of ordinary members.
The responsibilities of designated members
Designated members have to ensure that the LLP meets its legal obligations by:
- registering the LLP at Companies House
- appointing an auditor – if one is needed
- preparing and signing the accounts on behalf of the members
- delivering the accounts to Companies House
- notifying Companies House of any membership changes, or of a change to the registered office address or name of the LLP
- preparing, signing and delivering the annual return to Companies House
- acting on behalf of the LLP if it is wound up and dissolved
Designated members are legally accountable if they fail to carry out their duties properly.
Changes to members’ details or status
It is important that you notify Companies House whenever any of the members’ details change. For more information on what you need to file, see our guide on changes within a partnership.
Where to register your LLP and get help
Companies House can advise you on the registration process for a limited liability partnership (LLP), but cannot give you detailed advice on drawing up the necessary documentation.
You can register your LLP yourself by completing application form LL IN01 and sending it along with the fee to Companies House. Fees payable are outlined below in the section: ‘The cost of registration’ below.
Download form LL IN01 [opens in a new window].
Although you can register your LLP yourself, it is a good idea to seek professional advice. A company formation agent, solicitor or accountant can carry out the process for you, for a fee, as well as offer advice. A solicitor will also be able to help you draw up your deed of partnership. To find your nearest company formation agent, solicitor or accountant, look in your local telephone directory or search online. Many incorporation agents and software providers are now able to offer their customers a web-based electronic service which is an easier and quicker way for you to register your LLP (this is chargeable).
Search for a qualified solicitor on the Law Society website- Opens in a new window.
You may not be able to use the LLP name you want if that name is the same as that of another LLP or company on the registrar’s index of company names held at Companies House.
There is an exception to this if an existing LLP or company is in the same group as your LLP and consents to the use of your proposed LLP name. See our guide on rules for naming your limited company or limited liability partnership (LLP).
You can check the registrar’s index of company names with the WebCHeck service at Companies House.
The cost of registration
Find out more about Companies House fees on the Companies House website- Opens in a new window.
Companies House aims to process standard paper documents within five days of receipt.
To get an idea of the cost of using company formation agents or others who can handle the registration process for you, search online or find them in your local telephone directory.
Further help
Companies House will guide you through the registration process, or you can ask a solicitor or company formation agent to handle this for you. It is a good idea to seek the help of a solicitor to draw up a deed of partnership.
Deed of partnership of an LLP
A deed of partnership (or ‘partnership agreement’) is a legally binding agreement between the partners who are in business together. It describes how the partnership will be run and the rights and duties of the members themselves. The deed of partnership is usually drawn up by a solicitor, who will consult with the partners about exactly what should be in it.
It’s not absolutely necessary to have a deed in order to set up a limited liability partnership, but it’s a good idea as it can help to prevent misunderstandings and disputes between members.
What does the deed of partnership cover?
As well as giving basic information about the partnership, such as its business name and the names of the partners, the type of business and business address, the deed will usually set out:
- the amount of capital that each partner is to contribute to the business
- the way in which profits or losses are shared between partners, and whether any of the partners should be paid a salary
- working arrangements, such as how much time each partner should contribute to the business, who does what management tasks and what type of decisions need collective agreement between the partners
- changes to the partnership, such as how new partners can be appointed and what happens if a partner dies or wishes to leave
If members do not have a deed, they will be governed by the terms of the Limited Liability Partnerships Act 2000 (LLP Act 2000), which does not offer solutions to many of the problems that can arise and may not suit the way that you and your members want to work together. Read about the LLP Act 2000 on the HM Revenue & Customs (HMRC) website- Opens in a new window.
Naming your LLP
A limited liability partnership (LLP) can trade under the names of the partners, or some of the partners. You might choose to use an established business name of this kind if you are converting your ordinary partnership to an LLP. Alternatively you can use another business name, for example H & S LLP.
The trading name should not be the same as, or too similar to, that of any business that already exists, and it should not contain words that people might find offensive or misleading. The name must end with ‘Limited Liability Partnership’ or ‘LLP’.
You will need to obtain permission from the relevant professional bodies to use professional words, such as architect or solicitor, in your business name.
You will also need to obtain permission to use words connected with public authorities, such as health, education, etc.
You must make sure that your business website and stationery – such as letters and invoices – display the trading name, the fact that it is an LLP, the place of registration, the registration number, and the address of the registered office.
For more information, see our guides on how to choose the right name for your business and rules for naming your limited company or limited liability partnership (LLP).
Tax matters of an LLP
Once you’ve registered the LLP with Companies House, using form LL IN01, they will notify HM Revenue and Customs (HMRC), so you don’t need to do this. HMRC will then set up the right tax records for the partnership.
Each partner in the LLP must also register separately with HMRC for get their own tax records set up. Find out more about how to register partners in our guide on registering for Self Assessment.
On the whole, LLPs are treated the same as general partnerships for tax purposes. Like general partnerships, profits are shared among the members of a limited partnership. Individual members – not the limited partnership – pay tax on income or gains. Unlike limited companies, LLPs are not generally liable for Corporation Tax. The nominated partner will need to complete a Self Assessment tax return for the partnership every year. Members of the LLP will need to also complete a Self Assessment tax return and show their share of the profits on it.
For more on tax see the page on tax matters of a partnership in our guide on how to set up and register a partnership. This guide includes information on VAT, PAYE for employers and the Construction Industry Scheme.
Checklist: setting up and registering an LLP
As well as registering your limited liability partnership (LLP) with Companies House, there are several other things that you need to do to put it on a proper legal footing and maintain its status. Make sure you:
- send Companies House a completed and signed incorporation document – form LL IN01 – together with the appropriate filing fee
- display your LLP’s name on the outside of all its offices or other places of business
- display your LLP’s name on all its business stationery, including letters, invoices, receipts and cheques
- show your LLP’s place of registration, registered number and registered office address on all its business letters, order forms and electronic business communications
- check that you have received a Certificate of Incorporation from Companies House
- register with HM Revenue & Customs (HMRC) for VAT, PAYE or CIS if appropriate
- make sure all partners are registered with HMRC for Self Assessment
- send a Self Assessment tax return for the LLP to HMRC
- send a set of accounts to Companies House every year
- send Companies House an annual return – form LL AR01 – in order to keep your LLP’s records up to date
- inform Companies House of any changes to your LLP’s membership, the personal details of its members or the address of its registered office
If the partnership has a website, it will need to show the partnership’s name, registered office and geographic addresses, registered number, VAT number and the place of registration. It must also include an email address.
Could this article be better? Are details incorrect? Do you have something to contribute or a relevant article we can link to?
We’d love to hear from you and continue to keep this a free, useful resource for everyone! Get in touch.
Every effort has been made by the author(s) to ensure this article’s accuracy but it does not constitute legal advice tailored to your circumstances. If you act on it, you acknowledge that you do so at your own risk. We cannot assume responsibility and do not accept liability for any damage or loss which may arise as a result of your reliance upon it.
Related Guides
-
Outsourcing
Outsourcing is when you contract out a business function – a particular task, role or process…
-
Responsibilities to employees if you buy or sell a business
Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), when all or part of…
-
When an employee resigns
When an employee wants to resign, you can try to persuade them to change their mind…