In English and Scottish Law, a limited liability partnership (LLP) is essentially like a partnership but with liability for losses limited to the partners investment in the LLP. Limited liability partnerships were introduced to English and Scots law by the Limited liability partnerships act 2000. In essence, the act provides for the limited liability partnership to be a separate legal entity from the partners in the partnership, and limits the partners liability on wind up to their contribution to the LLP.
LLPs must be incorporated at companies house. The law requires that two or more persons intending to go into partnership and partake in a legitimate business , subscribe their names to an incorporation document, which should then be delivered to the registrar of companies at companies house.
The incorporation document also sets out a number of things. This includes naming the persons whoo will be designated members, or stating that all the members will be designated members. Designated members function like the directors of Limited companies. They sign the accounts and appoint auditors where required. There must always be at least two designated members, and where two are not appointed, or there is only one, all members would be deemed to be designated members. Like all legislation, this may be subject to change.
Once all legal requirements have been fulfilled, the registrar retains the incorporation document or a copy of the original and issues a certificate of incorporation for the Limited liability partnership.
Limited liability partnerships have to submit accounts to companies house at least once a year. The accounts are not subject to companies act format, but accountants are guided by UK GAAP such as the Statement of Recommended Practice: Accounting by Limited Liability Partnerships, a SORP
LLPs have to submit a partnership tax return just liked standard partnerships and the individual members are subject to personal tax under self assessment. The members are taxed on their share of the LLPs profit or loss for the accounting period, plus any other income they have for the financial year.
The LLP structure offers the members a significant benefit over the traditional partnership. This is the limited liability element. And as the LLP has a legal personality, the members of an LLP are not held to be generally and severally liable for the actions of an individual member
This article is limited to the treatment of Limited Liability Partnerships in England and Scotland, and is not intended in anyway to represent Legal or professional advice. You should seek professional advice should you intend to go into a limited liability partnership.