If you’re part of a limited liability partnership, having a definitive agreement will be essential to the smooth running of your business.
When the Limited Liability Partnerships Act 2000 came into force, it made it easier than ever to enter into unincorporated partnerships that have the benefit of reduced personal responsibility for any debts the business incurs.
Yet things can start to become complicated if you want to transfer an interest from one member to another. And of course, you have the added burden of filing your accounts with Companies House.
To protect your interests and those of the partnership as a whole, you need to know what to do – and where you stand – with regard to certain issues, laws and legislation. The expert advisors at First4lawyers are here to help.
What is a limited liability partnership?
A limited liability partnership (LLP) is a partnership which gives limited liabilities to some or all partners of a group, company, or other entity. This means that in an LLP, a partner is not liable or responsible for the debts the business accrues, nor for another partner's carelessness or misconduct.
Who can set up an LLP?
Anybody of any nationality may register an LLP on the condition they are not bankrupt, not subject to a restraint order, and not subject to UK government restrictions
How do I go about setting up an LLP?
You can set up (or ‘incorporate’) an LLP to run a business with two or more members. A member can be both a company and a person and is known within the LLP as a ‘corporate member’. To set up the LLP, you must:
- Choose a business name.
- Have at least two designated members.
- Register a business address (this will be publicly available).
- Draw up the LLP document that states how it will be run.
- Register the LLP with Companies House.
You must have at least two ‘designated members’ at all times. They have the most responsibilities; it is their duty to keep company accounts, among other things. But an LLP can have any number of ordinary members.
The LLP agreement will set out:
- How the different members will share profits between them.
- Who needs to agree to decisions.
- The nature of each member’s responsibilities.
- The ways in which members can leave or join the LLP.
What are the responsibilities of each member of the LLP?
Members must carry out their legal duties, as well as those defined in the LLP document. Every member must register for Self Assessment with HMRC, and designated members must also:
- Register the LLP for Self Assessment.
- Register the partnership for VAT if you expect your gross income to be more than £82,000 per year.
- Assess the need to appoint an auditor and do so if required.
- Keep company records.
- Send an annual return to Companies House.
- Prepare annual accounts and send them to Companies House.
- Inform Companies House of any changes e.g. to the registered business address or name, or the removal and addition of members.
- Act on behalf of the LLP during the winding up and dissolution process (if necessary).
I want legal advice with regard to an LLP - what should I do?
It is highly advisable that you seek legal advice from specialist commercial solicitors. While the very nature of an LLP protects your interests to a certain degree, there are still a lot of responsibilities to take care of. Here at First4lawyers, we can advise you and your partners on all legal aspects of LLPs.
Whether you want to form a partnership, terminate one, or resolve a dispute between members, we are here for you. Contact us to enquire about using a solicitor through First4lawyers, or fill out the Request a Callback form above.