A limited liability partnership (also known as an LLP) works a lot like any business partnership, with some differences, like responsibilities around business debt. Primarily, the partnership, rather than the individual partners, are responsible for any debt the business may have in the future.
They’re not always straight forward to set up because there are certain financial requirements for it to be deemed valid. This guide will help you to understand the basic steps involved, but as with all important legal processes, you may want to get legal advice to ensure the process runs smoothly, and every partner is properly protected.
How to set up a limited liability partnership
To complete the main steps to set up a limited liability partnership you need to:
- Select your businesses name.
- Register your business address.
- Set up the LLP agreement.
- Register the agreement with Companies House.
Although simple on the surface, the breakdown below shows many of the responsibilities involved in agreeing and registering a limited liability partnership.
1. Business names: Rules and requirements
You need to decide on a business name that will be registered with Companies House, an official government agency. This business name can be different to your customer-facing trade name.
The most important thing when choosing a business name is that it isn’t the same or similar to one already registered with Companies House. You can use their register to check if your preferred business name is already in use.
Your name also can’t be offensive or include a suggested connection to a government body without written consent from either a relevant government body or council.
The name also needs to end with the phrase ‘Limited Liability Partnership’ or the abbreviated LLP. Your trade name doesn’t need to include the LLP.
Once you’ve decided on a name, register it with the Companies House. They will tell you if your name is invalid because it’s too similar to a previously registered name.
2. Registering your business address
Along with your company name, you need to register a business address. It’s important the address is in the same country as the LLP.
It also needs to be a physical address – you can use a PO Box, but it needs to be followed with a separate physical address. This can be your home, but consider the registered address will be posted publicly and all correspondence will be sent there.
3. LLP membership requirements
A minimum of two people are needed to form an LLP, with no upper limit. Two members must be classed as ‘designated members’, which means they must:
- Register the LLP.
- Find and appoint an auditor.
- Prepare and sign documents representing all members of the LLP.
They are also responsible for all correspondence with Companies House, which includes notifying it of any changes to the business or membership, and delivering any documents.
The responsibilities of every partner, designated or otherwise, need to be laid out in the LLP agreement. It should also detail:
- The way that the profits will be split between members.
- Who the decision makers are for the business.
- How members can sever ties with the business.
All members must register for tax self-assessment with HM Revenue and Customs, no matter what they’re responsible for in the LLP.
4. Where to register the LLP
Companies House is responsible for dealing with LLPs. There are a few ways to register, all with different fees and processes.
- Third party software is available and legal to use. The one you choose will determine how you carry out the application, and the amount you pay to apply.
- You can download and fill in the LL IN01 form from the government website, and post it to Companies House.
- You can use an agent to fill in the paperwork on your behalf. Their fee will differ depending on the agent you choose.
Whichever application route you choose, Companies House will send a certificate of the partnership’s registration to your business address. That makes the LLP complete.
Need to know more about limited liability partnerships?
Whether you need to know more about applying for this type of partnership, you need to find out if it can be applicable to your business, or you have a partnership dispute, First4lawyers can help.
This process is complex, and not all businesses are able to register this type of partnership. Get in touch with us today, and our advisors can match your case to an experienced business law solicitor, who will work to make sure the interests of yourself, your partners and your business are carefully considered.
Note: First4lawyers offers this information as guidance, not advice. Before taking any action, you should seek professional assistance tailored to your personal circumstances and not rely on First4lawyers’ online information alone.