A limited liability partnership (LLP) is similar to an ordinary partnership - in that a number of individuals or limited companies share in
the risks, costs, responsibilities and profits of the business.
The difference is that liability is limited to the amount of money they have invested in the business and to any personal guarantees they
have given to raise finance. This means that members have some protection if the business runs into trouble.
Set-up
There is no restriction on the number of members, but at least two must be "designated" members - the law places extra responsibilities on
them.
If the LLP reduces in number and there are fewer than two designated members then every member is deemed to be a designated member.
LLPs must register at Companies House.
It's a good idea to draw up a written agreement between the members. For further advice, consult an accountant or solicitor.
Management and raising finance
Usually the members manage the business, but can delegate responsibilities to employees.
Members raise money out of their own assets, and/or with loans.
Records and accounts
The LLP itself and each individual member must make annual self-assessment returns to HM Revenue & Customs.
All LLPs must file accounts with Companies House.
A "shuttle" annual return (form LLP363) will be sent to the members before the anniversary of incorporation each year. It needs to be
completed and returned to Companies House with the appropriate fee.
Profits
Each member takes an equal share of the profits, unless the members agreement specifies otherwise.
Tax and National Insurance
Members of a partnership are taxed on their share of profits and pay the tax and National Insurance contributions (NICs), according to
their business structure.
An individual will pay income tax and NICs, and a limited company member will pay corporation tax.
Liability
Every LLP must have at least two designated members. Read the list of extra legal responsibilities placed on designated members at the
Companies House website.
