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What are limited liability partnerships?
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Limited Liability Partnerships ("LLPs") are
a new form of UK business entity. They enjoy the commercial
benefits that come from being a body corporate and
their members benefit from the protection of limited
liability. Yet LLPs can operate with all the organisational
flexibility of a partnership, and are taxed as such.
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LLPs were introduced in April 2001 following the Limited
Liability Partnerships Act 2000. Most of the relevant rules
governing registration and operation of LLPs are in the Limited
Liability Partnerships Regulations 2001 (SI 2001/1090).
Who should consider a limited liability partnership?
LLPs can be attractive vehicles for professional firms and other businesses,
including start - ups and joint ventures. They are particularly valuable for
businesses that would find corporation tax and other consequences of forming
and operating a limited company onerous, but want to enjoy corporate status
and limited liability for members.
For existing partnerships that convert to LLP status there
will be duty relief on the instrument transferring property
from the current partnership to the newly incorporated LLP
if relevant conditions are met.
What are the characteristics of an LLP?
LLPs are created by registration at Companies House on a
prescribed form LLP2 together with a statutory fee. The Registrar
issues a Certificate on registration that has the same effect
as the Certificate of Incorporation of a company. This means
it is easy to establish the existence and good standing of
an LLP in transactions where this is important, such as acquisition
of overseas assets by the LLP.
If members of an LLP do not expressly agree the contents
of a Members' agreement the Act provides for a basic set of
"default" terms.
However, M & N recommend an express written Agreement.
It does not have to be registered at Companies House.
LLPs must file an annual return and annual statutory accounts
similar to those filed by limited companies. Small company
exemptions apply, including audit exemptions rules. Generally,
though, Companies House compliance requirements are minimal.
There are no directors. However, "designated" members
have particular responsibility for certain statutory requirements.
There must be at least two designated members who are appointed
on a form LLP288a. They have the same rights and duties towards
the limited liability partnership as any other member but
the law also places extra responsibilities on designated members.
In particular they are responsible for:-
- Appointing an auditor (if one is needed)
- Signing the accounts on behalf of the members
- Delivering the accounts to the Registrar
- Notifying the Registrar of any membership changes or change
of registered office
- Preparing and signing the Annual Return
- Acting on behalf of the LLP if it is wound up or dissolved.
LLPs can create floating charges as security for borrowings.
This can be a major advantage over an ordinary partnership
when raising funds.
Members do not have to contribute a minimum amount of capital,
even in the event of a winding up. However, detailed provisions
prevent members siphoning off funds in the event of insolvency
and parts of the Insolvency Act 1986 will apply.
Our services
Our LLP service registration package includes:
- Name availability check for identical names
- Completion of the LLP 2
- Registration fee (24 hours service)
- Registration at Companies House and supply of original
Certificate of Incorporation
- Registered Office for one year
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