A limited liability partnership has the flexibility of a partnership and is taxed as such, in all other respects it is very similar to a limited company.
Benefits of an LLP
- Suitable for new and existing partnerships wishing to obtain limited liability status
- Aimed particularly at professional partnerships such as accountancy and solicitors firms
- Maintains tax status of a partnership
- The members have limited liability
- Incorporation is usually within 1 day
- Suitable for most commercial business activities
Key Features of an LLP
- Is a corporate body and a separate legal entity distinct from its members
- Every limited partnership must have at least two designated members at all times
- It can own and hold property, employ people and enter into contractual obligations
- Debts incurred are the debts of the LLP
- Has unlimited capacity, which means that third parties need not be concerned about any restrictions on its activities
- Has members, but no directors or shareholders – the members have limited liability
- No share capital and not subject to company law rules governing the maintenance of capital
- No memorandum or articles of association
An LLP has complete flexibility as regards the internal structure which it wishes to adopt; there are no requirements for board or general meetings or decision making by resolution.
As the members have limited liability, the protection of those dealing with an LLP requires that the LLP maintains accounting records, and delivers confirmation statements and annual accounts to the registrar of companies.
Membership of a Limited Liability Partnership
There are no shareholders in an LLP. Instead, there are members, who are identified in the initial incorporation document, with subsequent changes being reported within 14 days of the event occurring.
If membership falls to only one member and the limited liability partnership continues to carry on business for more than 6 months, then the benefits of limited liability are lost.
Designated members in a Limited Liability Partnership
Every limited liability partnership must have two designated members at all times. If there are fewer than two designated members, then every member is deemed to be a designated member (the LLP may have decided that all members will be designated members, or that only some members will be designated members).
The difference between a member and a designated member
With the agreement of the other members, a member may become a designated member at any time. Designated members have the same rights and duties towards the LLP as any other member.
In particular, designated members are responsible for:
- appointing an auditor (if one is needed)
- signing the accounts on behalf of the members
- delivering the accounts to Companies House
- notifying Companies House of any membership changes or change to the registered office address or name of the LLP
- preparing, signing and delivering the confirmation statement to Companies House
- acting on behalf of the LLP if it is wound up and dissolved
Companies House must be notified of
- The appointment of a new member or designated member
- A member or designated member ceasing to act in the limited liability partnership
- Changes in a member’s or designated member’s name or address or any of the other details originally registered
- Changes in a member’s status