Limited Liability Partnership FormationA 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.
Each member needs to register as self-employed - see the page in this guide on self-employment. There must be a minimum of two 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.
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 (HMRC). All LLPs must file accounts with Companies House. An annual reminder letter will be sent to the LLP a few weeks before the due date requesting they download the form from the Companies House website. It needs to be completed and returned to Companies House with the appropriate fee.
Each member takes an equal share of the profits, unless the members' agreement specifies otherwise.
Tax and National Insurance:
Members of a partnership pay tax and National Insurance contributions on their share of the profits. The profits of a member of an LLP are taxable as profits of a trade, profession or vocation and members remain self-employed and subject to Class 2 and Class 4 National Insurance contributions.
NB. We do not currently form LLPs.