Traditionally many businesses have traded as Partnerships. Quite often these have been professional firms, such as lawyers, accountants, architects, and surveyors. Perceived benefits of Partnerships are organisational flexibility and that the member partners remain self-employed, responsible for their own tax affairs. However, a significant disadvantage to such an arrangement is that the members, like sole traders, have unlimited liability for the debts and obligations of the business. As commerce has become more litigious so have traditional partnerships chosen to incorporate in the form of LLP status.
A Limited Liability Partnership (LLP) is a form of legal business entity where the members have limited liability in a similar way to shareholders in a limited company.
The main difference between a LLP and a limited company is that a LLP has the traditional flexibility of a partnership and is also taxed as a partnership. In many other respects it is very similar to a private company.
Who can start a LLP?
Two or more legal persons can form a LLP. A ‘person’ can be an individual, company, or firm. They can be resident in the UK or overseas.
What are the responsibilities of the Members?
The LLP must have at least two designated members at all times. Designated members are the same as all other members except they have some further legal responsibilities for which they are accountable. These are:-
- appointing an auditor (if one is needed);
- signing and delivery of the accounts to Companies House;
- notifying Companies House of changes in membership, registered office, or the LLP’s name;
- submission of Annual Returns; and
- acting on behalf of the LLP if it is wound up and dissolved.
What can a LLP do?
A LLP can do all those things that traditionally a partnership has been able to do. However they are not suitable to be used for non-profit making activities.
How do we file the incorporation documents?
LLP’s can be incorporated electronically either via a company formation agent such as ourselves or through specialist software. Typically prices range from £50 to £200 for similar service levels and return times are usually within 3 hours from the time of submission to Companies House. Not all formation agents currently provide online incorporation and many rely on postal applications.
Postal applications can be made for the standard registration fee of £40 to Companies House and take 4 to 7 days to be processed. Alternatively some formation agents, lawyers and accountants will still prepare postal applications and fees are usually in the order of £150 to £200.
What should the incorporation documents include?
- The requisite paper or online form;
- The proposed name;
- the registered office address and its situation (i.e. England and Wales, Wales, Scotland or Northern Ireland);
- whether all members are to be designated members or limited to specified and named members only;
- details of each proposed member, and whether they are a designated member or not;
- name approval if a sensitive word is to b used in the LLP name;
- a statement of compliance;
- the appropriate fee.
What is the Registered Office?
A registered office is a real location where notices, letters and reminders can be delivered to the LLP by hand or post. The place of business can be elsewhere.
A LLP cannot be redomiciled. So an LLP formed in Scotland, cannot at a later date move its Registered Office to England and Wales. However, its place of business can be moved and need not be in the same jurisdiction or country as the Registered Office.
What happens on Incorporation?
On incorporation Companies House will issue a Certificate of Incorporation which will note the name and registration number of the LLP; the date it was formed; and the situation of its Registered Office. It will be stamped by the Registrar.
The LLP’s statutory records as at that point will be published at Companies House and will be available for inspection at the Companies House web site.
What next?
Unlike a Company a LLP does not register its constitution in the form of a Memorandum or Articles of Association with Companies House. The Members should therefore ensure that a Partnership Agreement is drawn up to fully reflect the objects and constitutional arrangements of the LLP. This is a private document and is not open to public inspection.
Companies Direct provide online incorporation of LLP’s for as little as £50.00; normally processed in under 3 hours by Companies House. Visit our web site for further advice. We also provide legal support services in the drafting of partnership agreements and other constitutional documentation. Telephone 01738 500400
